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|z 9781513523507
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|a 1018-5941
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|a Catao, Luis.
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|a Default Premium /
|c Luis Catao, Rui Mano.
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|a Washington, D.C. :
|b International Monetary Fund,
|c 2015.
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|a 1 online resource (57 pages)
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|a IMF Working Papers
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|a <strong>Off-Campus Access:</strong> No User ID or Password Required
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|a <strong>On-Campus Access:</strong> No User ID or Password Required
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|a Electronic access restricted to authorized BRAC University faculty, staff and students
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|a We re-assess the view that sovereigns with a history of default are charged only a small and/or short-lived premium on the interest rate warranted by observed fundamentals. Our reassessment uses a metric of such a 'default premium' (DP) that is consistent with asymmetric information models and nests previous metrics, and applies it to a much broader dataset relative to earlier studies. We find a sizeable and persistent DP: in 1870-1938, it averaged 250 bps upon market re-entry, tapering to around 150 bps five years out; in 1970- 2011 the respective estimates are about 400 and 200 bps. We also find that: (i) these estimates are robust to many controls including on actual haircuts; (ii) the DP accounts for as much as 60% of the sovereign spread within five years of market re-entry; (iii) the DP rises with market exclusion spells. These findings help reconnect theory and evidence on why sovereign defaults are infrequent and earlier debt settlements are desirable.
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|a Mode of access: Internet
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|a Mano, Rui.
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|a IMF Working Papers; Working Paper ;
|v No. 2015/167
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|z Full text available on IMF
|u http://elibrary.imf.org/view/journals/001/2015/167/001.2015.issue-167-en.xml
|z IMF e-Library
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