Defaultable Debt, Interest Rates and the Current Account
Mark Aguiar and
Gita Gopinath
No 10731, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
World capital markets have experienced large scale sovereign defaults on a number of occasions, the most recent being Argentina's default in 2002. In this paper we develop a quantitative model of debt and default in a small open economy. We use this model to match four empirical regularities regarding emerging markets: defaults occur in equilibrium, interest rates are countercyclical, net exports are countercyclical, and interest rates and the current account are positively correlated. That is, emerging markets on average borrow more in good times and at lower interest rates as compared to slumps. Our ability to match these facts within the framework of an otherwise standard business cycle model with endogenous default relies on the importance of a stochastic trend in emerging markets.
JEL-codes: F4 (search for similar items in EconPapers)
Date: 2004-09
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)
Published as Aguiar, Mark, and Gita Gopinath. "Defaultable Debt, Interest Rates and the Current Account." Journal of International Economics 69(1): 64-83, June 2006
Published as Aguiar, Mark, and Gita Gopinath. "Defaultable Debt, Interest Rates and the Current Account." Proceedings, Federal Reserve Bank of San Francisco, June 5, 2004
Published as Mark Aguiar & Gita Gopinath, 2004. "Defaultable debt, interest rates and the current account," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
Downloads: (external link)
http://www.nber.org/papers/w10731.pdf (application/pdf)
Related works:
Journal Article: Defaultable debt, interest rates and the current account (2006) 
Journal Article: Defaultable debt, interest rates and the current account (2004) 
Working Paper: Defaultable debt, interest rates, and the current account (2004) 
Working Paper: Defaultable debt, interest rates and the current account (2004) 
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:nbr:nberwo:10731
Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10731
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().