Global corporate debt during crises: Implications of switching borrowing across markets

Fiscal Austerity during Debt Crises∗

This paper constructs a dynamic model of government borrowing and default. The government faces a fiscal constraint in that it cannot raise tax rates. By defaulting on the debt, the government can increase domestic consumption. Two types of default arise in this environment: fiscal defaults and aggregate defaults. Fiscal defaults occur because the government cannot service the debt due to its i...

Linkages across Sovereign Debt Markets

We develop a multicountry model in which default in one country triggers default in other countries. Countries are linked to one another by borrowing from and renegotiating with common lenders with concave payoffs. A foreign default increases incentives to default at home because it makes new borrowing more expensive and defaulting less costly. Foreign defaults tighten home bond prices because ...

VaR performance during the subprime and sovereign debt crises: An application to emerging markets

Article history: Received 18 July 2013 Received in revised form 9 May 2014 Accepted 15 May 2014 Available online 22 May 2014 Highly volatile scenarios, such as those provoked by the recent subprime and sovereign debt crises, have questioned the accuracy of current risk forecasting methods. This paper adds fuel to this debate by comparing the performance of alternative specifications for modelin...

Determinants of Corporate Borrowing

Borrowing During Unemployment: Unsecured Debt as a Safety Net

This paper explores two related questions: Does unsecured debt help households supplement lost earnings during unemployment, and does limited access to such credit have important welfare implications? These questions have become particularly relevant as consumers increasingly rely on unsecured debt to finance consumption. Growth in unsecured debt has been most striking among the poor. Some rese...