News, sovereign debt maturity, and default risk

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Show simple item record Yurdagul, Emircan Dvorkin, Maximiliano Sánchez, Juan M. Sapriza, Horacio 2022-03-28T14:06:50Z 2022-09-01T23:00:05Z 2020-09-01
dc.identifier.bibliographicCitation Dvorkin, M., Sánchez, J. M., Sapriza, H., & Yurdagul, E. (2020). News, sovereign debt maturity, and default risk. Journal of International Economics, 126, p. 103352
dc.identifier.issn 0022-1996
dc.description.abstract Leading into a debt crisis, interest rate spreads on sovereign debt rise before the economy experiences a decline in productivity, suggesting that news about future economic developments may play an important role in these episodes. An empirical VAR estimation shows that a news shock has a larger contemporaneous impact on sovereign credit spreads than a comparable shock to labor productivity. A quantitative model of news and sovereign debt default with endogenous maturity choice generates impulse responses and a variance decomposition similar to the empirical VAR estimates. The dynamics of the economy after a bad news shock share some features of a productivity shock and some features of sudden stop events. However, unlike during sudden stop episodes, long-term debt does not shield the country from bad news shocks, and it may even exacerbate default risk. Finally, an increase in the precision of news allows the government to improve its debt maturity management, especially during periods of high stress in credit markets, and thus face lower yield spreads while increasing the amount of debt.
dc.description.sponsorship Yurdagul gratefully acknowledges the support from the Ministerio de Economía y Competitividad (Spain) (ECO2015-68615-P), María de Maeztu grant (MDM 2014-0431), and from Comunidad de Madrid, MadEco-CM (S2015/HUM-3444).
dc.language.iso eng
dc.publisher Elsevier
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.subject.other Country risk
dc.subject.other Crises
dc.subject.other Default
dc.subject.other Maturity
dc.subject.other News
dc.subject.other Sovereign debt
dc.subject.other Spreads
dc.title News, sovereign debt maturity, and default risk
dc.type article
dc.subject.jel F34
dc.subject.jel F41
dc.subject.jel G15.
dc.subject.eciencia Economía
dc.rights.accessRights openAccess
dc.relation.projectID Comunidad de Madrid. S2015/HUM-3444
dc.relation.projectID Gobierno de España. ECO2015-68615-P
dc.type.version acceptedVersion
dc.identifier.publicationfirstpage 1
dc.identifier.publicationlastpage 23
dc.identifier.publicationtitle JOURNAL OF INTERNATIONAL ECONOMICS
dc.identifier.publicationvolume 126
dc.identifier.uxxi AR/0000027475
dc.contributor.funder Ministerio de Economía y Competitividad (España)
dc.contributor.funder Comunidad de Madrid
dc.affiliation.dpto UC3M. Departamento de Economía
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