Policy Credibility And Sovereign Credit

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Policy Credibility And Sovereign Credit

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Author : Mr.David Hauner
language : en
Publisher: International Monetary Fund
Release Date : 2007-01-01

Policy Credibility And Sovereign Credit written by Mr.David Hauner and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-01-01 with Business & Economics categories.

References to policy credibility, particularly with regard to fiscal policy, are ubiquitous in both economic literature and financial markets, even though it is not directly observable. The case of the EU new member states (NMS)-emerging markets joining a supranational entity that is generally considered to have higher policy credibility-provides a unique experiment to assess the effects of credibility on sovereign credit. This paper examines the impact of EU accession on three key variables that can reflect in varying degrees policy credibility: sovereign ratings, foreign currency spreads, and local currency yields. The results suggest that the NMS appear to have enjoyed higher credibility compared to their peers.

Sovereign Debt Sustainability And Central Bank Credibility

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Author : Tim Willems
language : en
Publisher: International Monetary Fund
Release Date : 2022-01-28

Sovereign Debt Sustainability And Central Bank Credibility written by Tim Willems and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-01-28 with Business & Economics categories.

This article surveys the literature on sovereign debt sustainability from its origins in the mid-1980s to the present, focusing on four debates. First, the shift from an “accounting based” view of debt sustainability, evaluated using government borrowing rates, to a “model based” view which uses stochastic discount rates. Second, empirical tests focusing on the relationship between primary balances to debt. Third, debt sustainability in the presence of rollover risk. And fourth, whether government borrowing costs below rates of growth (“r

Sovereign Debt Portfolios Bond Risks And The Credibility Of Monetary Policy

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Author : Wenxin Du
language : en
Publisher:
Release Date : 2016

Sovereign Debt Portfolios Bond Risks And The Credibility Of Monetary Policy written by Wenxin Du and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with Debts, Public categories.

Abstract: Nominal debt provides consumption-smoothing benefits if it can be inflated away during recessions. However, we document empirically that countries with more countercyclical inflation, where nominal debt provides better consumption-smoothing, issue more foreign-currency debt. We propose that monetary policy credibility explains the currency composition of sovereign debt and nominal bond risks in the presence of risk-averse investors. In our model, low credibility governments inflate during recessions, generating excessively countercyclical inflation in addition to the standard inflationary bias. With countercyclical inflation, investors require risk premia on nominal debt, making nominal debt issuance costly for low credibility governments. We provide empirical support for this mechanism, showing that countries with higher nominal bond-stock betas have significantly larger nominal bond risk premia and borrow less in local currency

Sovereign Debt Portfolios Bond Risks And The Credibility Of Monetary Policy

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Author : Wenxin Du
language : en
Publisher:
Release Date : 2019

Sovereign Debt Portfolios Bond Risks And The Credibility Of Monetary Policy written by Wenxin Du and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.

We document that governments whose local currency debt provides them with greater hedging benefits actually borrow more in foreign currency. We introduce two features into a government's debt portfolio choice problem to explain this finding: risk-averse lenders and lack of monetary policy commitment. A government without commitment chooses excessively counter-cyclical inflation ex post, which leads risk-averse lenders to require a risk premium ex ante. This makes local currency debt too expensive from the government's perspective and thereby discourages the government from borrowing in its own currency.

Sovereign Debt

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Author : Mr. Leonardo Martinez
language : en
Publisher: International Monetary Fund
Release Date : 2022-06-17

Sovereign Debt written by Mr. Leonardo Martinez and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-06-17 with Business & Economics categories.

This paper surveys the literature on sovereign debt from the perspective of understanding how sovereign debt differs from privately issue debt, and why sovereign debt is deemed safe in some countries but risky in others. The answers relate to the unique power of the sovereign. One the one hand, a sovereign has the power to tax, making debt relatively safe; on the other, it also has control over its territory and most of its assets, making debt enforcement difficult. The paper discusses debt contracts and the sovereign debt market, sovereign debt restructurings, and the empirical and theoretical literatures on the costs and causes of defaults. It describes the adverse impact of sovereign default risk on the issuing countries and what explains this impact. The survey concludes with a discussion of policy options to reduce sovereign risk, including fiscal frameworks that act as commitment devices, state-contingent debt, and independent and credible monetary policy.

Managing The Sovereign Bank Nexus

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Author : Mr.Giovanni Dell'Ariccia
language : en
Publisher: International Monetary Fund
Release Date : 2018-09-07

Managing The Sovereign Bank Nexus written by Mr.Giovanni Dell'Ariccia and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-09-07 with Business & Economics categories.

This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.

Sovereign Debt Structure For Crisis Prevention

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Author : Eduardo Borensztein
language : en
Publisher: International Monetary Fund
Release Date : 2004

Sovereign Debt Structure For Crisis Prevention written by Eduardo Borensztein and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Business & Economics categories.

About public debt management

Central Bank Credibility

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Author : Michael D. Bordo
language : en
Publisher:
Release Date : 2015

Central Bank Credibility written by Michael D. Bordo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with Banks and banking, Central categories.

In this paper we provide empirical measures of central bank credibility and augment these with historical narratives from eleven countries. To the extent we are able to apply reliable institutional information we can also indirectly assess their role in influencing the credibility of the monetary authority. We focus on measures of inflation expectations, the mean reversion properties of inflation, and indicators of exchange rate risk. In addition we place some emphasis on whether credibility is particularly vulnerable during financial crises, whether its evolution is a function of the type of crisis or its kind (i.e., currency, banking, sovereign debt crises). We find credibility changes over time are frequent and can be significant. Nevertheless, no robust empirical connection between the size of an economic shock (e.g., the Great Depression) and loss of credibility is found. Second, the frequency with which the world economy experiences economic and financial crises, institutional factors (i.e., the quality of governance) plays an important role in preventing a loss of credibility. Third, credibility shocks are dependent on the type of monetary policy regime in place. Finally, credibility is most affected by whether the shock can be associated with policy errors.

Rethinking Sovereign Debt

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Author : Odette Lienau
language : en
Publisher: Harvard University Press
Release Date : 2014-02-18

Rethinking Sovereign Debt written by Odette Lienau and has been published by Harvard University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-02-18 with Business & Economics categories.

Conventional wisdom holds that all nations must repay debt. Regardless of the legitimacy of the regime that signs the contract, a country that fails to honor its obligations damages its reputation. Yet should today's South Africa be responsible for apartheid-era debt? Is it reasonable to tether postwar Iraq with Saddam Hussein's excesses? Rethinking Sovereign Debt is a probing analysis of how sovereign debt continuity--the rule that nations should repay loans even after a major regime change, or else expect consequences--became dominant. Odette Lienau contends that the practice is not essential for functioning capital markets, and demonstrates its reliance on absolutist ideas that have come under fire over the last century. Lienau traces debt continuity from World War I to the present, emphasizing the role of government officials, the World Bank, and private markets in shaping our existing framework. Challenging previous accounts, she argues that Soviet Russia's repudiation of Tsarist debt and Great Britain's 1923 arbitration with Costa Rica hint at the feasibility of selective debt cancellation. Rethinking Sovereign Debt calls on scholars and policymakers to recognize political choice and historical precedent in sovereign debt and reputation, in order to move beyond an impasse when a government is overthrown.

From Banking To Sovereign Stress Implications For Public Debt

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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 2014-12-22

From Banking To Sovereign Stress Implications For Public Debt written by International Monetary Fund and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-12-22 with Business & Economics categories.

This paper explores how banking sector developments and characteristics influence the propagation of risks from the banking sector to sovereign debt, including how they affect the extent of fiscal costs of banking crises when those occur. It then proposes practices and policies for the fiscal authorities to help manage the risks and enhance crisis preparedness.