Maturity, Indebtedness, and Default Risk

Satyajit Chatterjee () and Burcu Eyigungor

American Economic Review, 2012, vol. 102, issue 6, 2674-99

Abstract: We advance quantitative-theoretic models of sovereign debt by proving the existence of a downward sloping equilibrium price function for long-term debt and implementing a novel method to accurately compute it. We show that incorporating long-term debt allows the model to match Argentina's average external debt-to-output ratio, average spread on external debt, the standard deviation of spreads, and simultaneously improve upon the model's ability to account for Argentina's other cyclical facts. We also investigated the welfare properties of maturity length and showed that if the possibility of self-fulfilling rollover crises is taken into account, long-term debt is superior to short-term debt. (JEL E23, E32, F34, O11, O19)

Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (244)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.6.2674 (application/pdf)
http://www.aeaweb.org/aer/data/oct2012/20090138_data.zip dataset accompanying article (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Maturity, indebtedness, and default risk (2011)
Working Paper: Maturity, indebtedness, and default risk (2010)
Working Paper: Maturity, indebtedness, and default risk (2009)
Working Paper: Maturity, Indebtedness, and Default Risk (2009)
Working Paper: Maturity, Indebtedness and Default Risk (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:102:y:2012:i:6:p:2674-99

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().