Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7363928 | Journal of International Economics | 2018 | 24 Pages |
Abstract
A model of dynamic contracting with private information is constructed to study sovereign lending and default. The model endogenizes debt exclusion and provides a theory of reentry and a theory of debt dynamics within the exclusion period. It explains why countries may end up more indebted after the exclusion period. It offers an interpretation for the mixed evidence on the correlation between default probability and indebtedness. It also explains the observed positive correlation between the duration of default and the size of haircut.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Jie Luo, Cheng Wang,