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| dc.title | Rollover and Interest-Rate Risks in Self-Fulfilling Debt Models |
| dc.contributor.author | Ayres, João |
| dc.contributor.author | Paluszynski, Radoslaw |
| dc.contributor.orgunit | Department of Research and Chief Economist |
| dc.coverage | Mexico |
| dc.date.available | 2023-12-12T00:12:00 |
| dc.date.issue | 2023-12-12T00:12:00 |
| dc.description.abstract | This paper proposes a model of sovereign default that features interest rate multiplicity driven by rollover risk. Our core mechanism shows that the possibility of a rollover crisis by itself can lead to high interest rates, which in turn reinforces the rollover risk. By exploiting complementarity between the traditional notions of slow- and fast-moving crises, our model generates a rich simulated dynamics that features frequent defaults and a volatile bond spread even in the absence of shocks to fundamentals. In the presence of risky income, our mechanism amplifies the dynamics of debt and spreads relative to model benchmarks where equilibrium multiplicity relies on the underlying shocks to income. |
| dc.format.extent | 31 |
| dc.identifier.doi | http://dx.doi.org/10.18235/0005361 |
| dc.identifier.url | https://publications.iadb.org/publications/english/document/Rollover-and-Interest-Rate-Risks-in-Self-Fulfilling-Debt-Models.pdf |
| dc.language.iso | en |
| dc.publisher | Inter-American Development Bank |
| dc.subject | Sovereign Default |
| dc.subject | Auction |
| dc.subject | Interest Rate |
| dc.subject | Financial Bond |
| dc.subject | Economy |
| dc.subject | Rating |
| dc.subject | Debt Management |
| dc.subject | Debtor Finance |
| dc.subject.jelcode | E44 - Financial Markets and the Macroeconomy |
| dc.subject.jelcode | F34 - International Lending and Debt Problems |
| dc.subject.keywords | sovereign default;self-fulfilling crises |
| dc.type | Working Papers |
| idb.identifier.pubnumber | IDB-WP-01542 |
| idb.operation | RG-K1089 |