Sovereign Debt Disclosure

Bulent Guler (), Yasin Onder and Temel Taskin ()
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Temel Taskin: -

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: This paper studies debt and default dynamics under alternative disclosure arrangements in a sovereign default model. The government can access both observable and hidden debt. We show, both theoretically and quantitatively, that when debt is not fully disclosed, the government does not internalize the full effects of hidden debt choices on bond prices, thereby reducing the cost of holding hidden debt. We find that switching to a full disclosure regime shifts the portfolio from hidden to observable debt, exacerbating the debt dilution problem. Thus, contrary to conventional wisdom, this switch generates welfare losses.

Keywords: Hidden debt; Debt disclosure; Sovereign debt; Sovereign default; Sovereign-to- sovereign lending (search for similar items in EconPapers)
JEL-codes: E31 F34 F45 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2024-09
New Economics Papers: this item is included in nep-dge, nep-ipr and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:24/1094

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