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Sovereign Debt Restructuring: A Dynamic Discrete Choice Approach

Author

Listed:
  • Maximiliano Dvorkin

    (Federal Reserve Bank of St. Louis)

  • Emircan Yurdagul

    (uc3m)

  • Horacio Sapriza

    (Federal Reserve Board)

  • Juan Sanchez

    (Federal Reserve Bank of St. Louis)

Abstract

Sovereign debt crises generally involve debt restructurings characterized by debt maturity extensions, delayed payments, face-value haircuts, and temporary financial autarky. We develop a novel quantitative model of endogenous sovereign debt maturity choice and restructuring that rationalizes the debt dynamics observed around distressed debt restructurings. The use of dynamic discrete choice solution methods allows us to smooth the borrower's decision rules on default and debt portfolio choices, rendering the problem tractable.

Suggested Citation

  • Maximiliano Dvorkin & Emircan Yurdagul & Horacio Sapriza & Juan Sanchez, 2018. "Sovereign Debt Restructuring: A Dynamic Discrete Choice Approach," 2018 Meeting Papers 1273, Society for Economic Dynamics.
  • Handle: RePEc:red:sed018:1273
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    References listed on IDEAS

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    Cited by:

    1. Cristina Arellano & Yan Bai & Gabriel P. Mihalache, 2020. "Deadly Debt Crises: COVID-19 in Emerging Markets," NBER Working Papers 27275, National Bureau of Economic Research, Inc.
    2. Dvorkin, Maximiliano & Sánchez, Juan M. & Sapriza, Horacio & Yurdagul, Emircan, 2020. "News, sovereign debt maturity, and default risk," Journal of International Economics, Elsevier, vol. 126(C).
    3. Maximiliano Dvorkin & Juan M. Sanchez & Horacio Sapriza & Emircan Yurdagul, 2018. "News, sovereign debt maturity, and default risk," Working Papers 2018-033, Federal Reserve Bank of St. Louis, revised 18 May 2020.
    4. Cristina Arellano & Gabriel Mihalache & Yan Bai, 2018. "Inflation Targeting with Sovereign Default Risk," 2018 Meeting Papers 851, Society for Economic Dynamics.
    5. Mihalache, Gabriel, 2020. "Sovereign default resolution through maturity extension," Journal of International Economics, Elsevier, vol. 125(C).
    6. Marina Azzimonti & Gabriel P. Mihalache & Laura Karpuska, 2020. "Bargaining over Taxes and Entitlements," NBER Working Papers 27595, National Bureau of Economic Research, Inc.
    7. Marina Azzimonti & Gabriel P. Mihalache & Laura Karpuska, 2020. "Bargaining over Mandatory Spending and Entitlements," NBER Working Papers 27595, National Bureau of Economic Research, Inc.

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