{"id":9205,"date":"2022-07-27T06:54:49","date_gmt":"2022-07-27T06:54:49","guid":{"rendered":"https:\/\/depocen.org\/publications\/sovereign-default-and-private-governmentinformation\/"},"modified":"2022-07-27T06:54:49","modified_gmt":"2022-07-27T06:54:49","slug":"sovereign-default-and-private-governmentinformation","status":"publish","type":"publications","link":"https:\/\/depocen.org\/en\/publications\/sovereign-default-and-private-governmentinformation\/","title":{"rendered":"Sovereign Default and Private Government\r\nInformation"},"content":{"rendered":"<p>This paper develops a model of sovereign debt in which the government has<br \/>\nsome private information about the domestic economy. Sovereign borrowing is<br \/>\nsustainable without enforcement, as repayment is a costly signal about the hidden<br \/>\neconomic fundamental. The signaling mechanism is able to jointly explain<br \/>\nthree empirical observations: (1) sovereign defaults usually happen in bad macroeconomic<br \/>\nconditions, (2) foreign credit to the private sector contracts after the<br \/>\ngovernment defaults and expands after subsequent improvements in sovereign ratings,<br \/>\nand (3) the current accounts and interest rates are usually counter-cyclical,<br \/>\nespecially in emerging markets. Furthermore the model reveals a novel positive<br \/>\nexternality of precautionary savings on the sustainability of sovereign debt. It also<br \/>\npredicts that domestic agents, if left on their own, will under-insure against the<br \/>\nrisk of sovereign defaults. A numerical exercise shows that the information channel<br \/>\ncan explain a nontrivial level of sovereign borrowing. Overall, the paper argues<br \/>\nthat private government information plays an important role in understanding a<br \/>\ncountry&#8217;s ability to borrow from abroad.<\/p>\n","protected":false},"featured_media":0,"template":"","cate_publications":[],"author_publications":[1864,1865],"topic_publications":[],"class_list":["post-9205","publications","type-publications","status-publish","hentry","author_publications-toan-phan","author_publications-toan-phan-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/publications\/9205","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/publications"}],"about":[{"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/types\/publications"}],"wp:attachment":[{"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/media?parent=9205"}],"wp:term":[{"taxonomy":"cate_publications","embeddable":true,"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/cate_publications?post=9205"},{"taxonomy":"author_publications","embeddable":true,"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/author_publications?post=9205"},{"taxonomy":"topic_publications","embeddable":true,"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/topic_publications?post=9205"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}