Long-duration bonds and sovereign defaults
Juan Hatchondo and
No 08-02, Working Paper from Federal Reserve Bank of Richmond
This paper extends the baseline framework used in recent quantitative studies of sovereign default by assuming that governments can borrow using long-duration bonds. Previous studies have assumed that governments can borrow using bonds that mature after one quarter. Once we assume that the government issues bonds with a duration that is close to the average duration observed in emerging economies, the model is able to generate a substantially higher and more volatile interest rate. This narrows the gap between the predictions of the model and the data, which indicates that the introduction of long-duration bonds may be a useful tool for future research about emerging economies. Our analysis is also relevant for the study of other credit markets.
Keywords: Bonds (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (142) Track citations by RSS feed
Downloads: (external link)
Journal Article: Long-duration bonds and sovereign defaults (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedrwp:08-02
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Working Paper from Federal Reserve Bank of Richmond Contact information at EDIRC.
Bibliographic data for series maintained by Christian Pascasio ().