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Sovereign Debt Disclosure

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  • Bulent Guler

  • Yasin K rsat nder

  • Temel Taskin

Abstract

This paper studies debt and default dynamics under alternative disclosure arrangements in a sovereign default model. The government can access both observable and hidden debt. We show, both theoretically and quantitatively, that when debt is not fully disclosed, the government does not internalize the full effects of hidden debt choices on bond prices, thereby reducing the cost of holding hidden debt. We find that switching to a full disclosure regime shifts the portfolio from hidden to observable debt, exacerbating the debt dilution problem. Thus, contrary to conventional wisdom, this switch generates welfare losses.

Suggested Citation

  • Bulent Guler & Yasin K rsat nder & Temel Taskin, 2024. "Sovereign Debt Disclosure," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 24/1094, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:24/1094
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    1. Horn, Sebastian & Reinhart, Carmen M. & Trebesch, Christoph, 2025. "China's lending to developing countries: From boom to bust," Kiel Working Papers 2304, Kiel Institute for the World Economy (IfW Kiel).

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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