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A theory of sovereign debt roll-over crisis


  • Hattori, Masazumi


In this paper, we attempt to provide theoretical investigation to debt roll-over crisis in government bond market. By using the global game techniques, we analyse coordination problem in debt auction. The approach in this paper allows us to have insight on the relation between occurence of soverign debt roll-over crisis and the fundamentals of economy which is not clearly explained in preceding works. This paper also makes it clear how the amount of debt for refinancing affects occurrence of soverign debt roll-over crisis. Inplications to policymakers are that they should pay attention to possible serious consequence of debt-bunching which usually grows gradually over time. In public debt management, the government decisions today affect the situation facing the government in the future via change in redemption schedules. Although the cost of debt roll-over crisis is not easy to gauge beforehand, its possibility should be noted by policymakers.

Suggested Citation

  • Hattori, Masazumi, 2004. "A theory of sovereign debt roll-over crisis," LSE Research Online Documents on Economics 24700, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:24700

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    References listed on IDEAS

    1. Eichengreen, Barry & Ruhl, Christof, 2001. "The bail-in problem: systematic goals, ad hoc means," Economic Systems, Elsevier, vol. 25(1), pages 3-32, March.
    2. Calvo, Guillermo A. & Mendoza, Enrique G., 1996. "Mexico's balance-of-payments crisis: a chronicle of a death foretold," Journal of International Economics, Elsevier, vol. 41(3-4), pages 235-264, November.
    3. Calvo, Guillermo A, 1988. "Servicing the Public Debt: The Role of Expectations," American Economic Review, American Economic Association, vol. 78(4), pages 647-661, September.
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    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance
    • J1 - Labor and Demographic Economics - - Demographic Economics


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