Publication:
Is inflation default? The role of information in debt crises

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dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorGalli, Carlo
dc.contributor.authorBassetto, Marco
dc.contributor.funderEuropean Commissionen
dc.date.accessioned2022-06-29T13:33:44Z
dc.date.available2022-06-29T13:33:44Z
dc.date.issued2019-10-01
dc.description.abstractWe study the information sensitivity of government debt denominated in domestic versus foreign currency: the former is subject to inflation risk and the latter to default. Default only affects sophisticated bond traders, whereas inflation concerns a larger and less informed group. Within a two- period Bayesian trading game, differential information manifests itself in the secondary market, and we display conditions under which debt prices are more resilient to bad news even in the primary market, where only sophisticated players operate. Our results can explain debt prices across countries following the 2008 financial crisis, and also provide a theory of “original sin.”en
dc.description.sponsorshipFinancial support from the ADEMU (H2020, No. 649396) project and from the ESRC Centre for Macroeconomics is gratefully acknowledged.en
dc.identifier.bibliographicCitationBassetto, M., & Galli, C. (2019). Is Inflation Default? The Role of Information in Debt Crises. American Economic Review, 109 (10), pp. 3556-3584.es
dc.identifier.doihttps://doi.org/10.1257/aer.20170721
dc.identifier.issn0002-8282
dc.identifier.publicationfirstpage3556es
dc.identifier.publicationissue10es
dc.identifier.publicationlastpage3584es
dc.identifier.publicationtitleAMERICAN ECONOMIC REVIEWen
dc.identifier.publicationvolume109es
dc.identifier.urihttps://hdl.handle.net/10016/35333
dc.identifier.uxxiAR/0000029281
dc.language.isoenges
dc.publisherAmerican Economic Associationen
dc.relation.projectIDinfo:eu-repo/grantAgreement/EC/H2020/649396es
dc.rights© The author(s)en
dc.rights.accessRightsopen accessen
dc.subject.ecienciaEconomíaes
dc.subject.jelD84
dc.subject.jelF34
dc.subject.jelH63
dc.subject.otherExpectationsen
dc.subject.otherSpeculationsen
dc.subject.otherInternational lending and debt problemsen
dc.subject.otherNational debten
dc.subject.otherDebt managementen
dc.subject.otherSovereign debten
dc.titleIs inflation default? The role of information in debt crisesen
dc.typeresearch article*
dc.type.hasVersionVoR*
dspace.entity.typePublication
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