Reputation and partial default
By: Amador, Manuel and Phelan, Christopher
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Material type: 
BookPublisher: The American Economic Review: Insights Description: 5(2), Jun, 2023: p.158-172.
In:
The American Economic Review: InsightsSummary: This paper presents a continuous-time reputation model of sovereign debt allowing for both varying levels of partial default and full default. In it, a government can be a nonstrategic commitment type or a strategic opportunistic type, and a government's reputation is its equilibrium Bayesian posterior of being the commitment type. Our equilibrium has that for bond levels reachable by both types without defaulting, bigger partial defaults (or bigger haircuts for bond holders) imply higher interest rates for subsequent bond issuances, as in the data.- Reproduced
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 5(2), Jun, 2023: p.158-172 | Available | AR129573 |
This paper presents a continuous-time reputation model of sovereign debt allowing for both varying levels of partial default and full default. In it, a government can be a nonstrategic commitment type or a strategic opportunistic type, and a government's reputation is its equilibrium Bayesian posterior of being the commitment type. Our equilibrium has that for bond levels reachable by both types without defaulting, bigger partial defaults (or bigger haircuts for bond holders) imply higher interest rates for subsequent bond issuances, as in the data.- Reproduced
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