Search results for "External debt"
showing 10 items of 25 documents
The Case for Contingent Convertible Debt for Sovereigns
2015
We make the case for sovereigns to issue contingent convertible bonds as a means to forestall debt crises. These instruments contractually stipulate payment standstill, contingent on a sovereign’s credit default swap spread breaching a distress threshold. This is a financial innovation solution to the lack of sovereign debt restructuring mechanisms, limiting ex ante the likelihood of debt crises and imposing ex post risk sharing between creditors and the debtor. The new instruments are contingent contracts addressing neglected risks in sovereign debt. Building on literature for contingent convertible debt for banks we address the design of sovereign contingent debt, including market discipl…
Foreign Direct Investment Drivers in Romania
2013
Foreign Direct Investment (FDI) represents a condition sine qua non for a sustainable development of Romania, taking into consideration the fact that the domestic capital is not enough to assure a positive and significant growth. The present study uses the multiple linear regression to determine the main factors which influence FDI level in Romania. The international reserve and the capital market index BET have a direct and positive impact on the foreign investment flow, while the short, medium and long private and public external debt proved to influence direct, but in a negative way, the FDI.
Hard currency indebtedness of the developed socialist countries
1985
In recent years the problems of the indebtedness of the communist countries have been driven somewhat into the background by the high foreign indebtedness of many developing countries and the attention attracted by the balance of payments crises in Brazil and Mexico. Yet there are many indications that the need for the socialist debtor nations to adjust their balance of payments policy has not lessened but, to a large extent, simply been deferred. It is therefore not unlikely that the 1980s will witness a new need to solve the problems of those nations and their creditors in the West.
Repatriation of Debt in the Euro Crisis: Evidence for the Secondary Market Theory
2013
The Euro Crisis has marked a sharp inversion in the process of the European financial integration and, more specifically, a repatriation of countries' debt from foreign to domestic investors. Yet the drivers of the financial fragmentation remain unclear. This paper investigates the empirical patterns in light of competing theories of cross-border portfolio allocation. Three main empirical regularities stand out: i) the repatriation of debt occurred primarily in crisis countries; ii) the repatriation affected mainly public debt; iii) the public debt of crisis countries was reallocated to politically influential countries within the Euro Area. Standard theories of portfolio allocation and hom…
Public debt, money and consumer prices: a vector error correction model for Germany
2015
In the paper, the authors analyse the interaction between public debt and inflation including the mutual impulse response. The European sovereign debt crisis brought once again a focus onto the consequences of government debt in combination with an expansionary monetary policy for the development of consumer prices. Public deficits can lead to higher inflation rates if the money supply is expansionary. The high level of national debt, not only in the Euro-crisis countries, and the strong increase in the total assets of the European Central Bank, as a result of the unconventional monetary policy, have caused fears of inflating government debt. The transmission from public debt to inflation t…
Análisis de la sostenibilidad del sector exterior en la OCDE con técnicas de multicointegración
2022
Este artículo analiza la sostenibilidad externa de un grupo de 23 países de la OCDE durante el periodo 1970-2020. La estrategia empírica adoptada muestra la importancia del desequilibrio acumulado como desencadenante del ajuste externo, en línea con la propuesta de Gourinchas y Rey (2007). Para ello, contrastamos la sostenibilidad externa a través de la relación acumulado-flujo entre las variables que representan las relaciones externas de una economía abierta utilizando varios tipos de contrastes de cointegración y multicointegración. Los resultados obtenidos apuntan hacia la sostenibilidad en sentido débil en el análisis de los flujos, mientras que desde el punto de vista del enfoque acum…
THE IMPACT OF REGIONAL AND COHESION POLICY ON THE ECONOMIC DEVELOPMENT OF THE EU
2012
As the global financial and economic crisis hit the European Union, no country was left unharmed. To this day, the Member States share the burden of excessive foreign debt, inflation, budget deficit, high unemployment levels, shaken stability of the currency, and many more. Multiple responses were introduced to these damaging effects, including adopting changes to the use of the Globalisation Adjustment Fund, enabling a Financial Stability Mechanism for the Euro zone and introducing a number of micro-financing instruments, particularly to support SMEs. Nevertheless, these have all been short-term actions, which will not suffice to ensure a long-term, sustainable economic growth of the Europ…
Risk Profiles for Re-Profiling the Sovereign Debt of Crisis Countries
2014
This paper uses a risk-management approach to re-profile the sovereign debt of countries facing debt crises. Using scenario analysis we develop a risk measure of the sovereign's debt -- Conditional Debt-at-Risk -- and an optimization model is used to trace risk profiles that tradeoff expected cost of debt financing against the Conditional Debt-at-Risk. The risk profiles are particularly informative for crisis countries, as they allow us to identify, with high-probability, debt unsustainability. We develop risk profiles for two Eurozone countries with excessive debt, Cyprus and Italy, both in their current form and under various forms of restructuring or rescheduling, and show how to assess …
Is external debt sustainable? A probabilistic approach
2020
Abstract We develop a probabilistic approach to measure a country's external debt sustainability. Using data on international investment position and balance of payments from the International Monetary Fund, we estimate a vector autoregressive model for 38 countries (11 developed and 27 developing). Using the estimated parameters, we perform a Monte Carlo simulation to compute the distribution of the capacity to repay for each country. A large portion of the projected distribution to the right of current debt is a warning indicator, signalling the need for devaluation. We provide simulations for each country. One scenario is where the discount factor is lower than 1. According to the litera…
Determinants of sub-central European government debt
2017
Abstract The aim of this paper is to analyze the determinants of sub-central government debt in Europe (Italy, France, Austria, Germany, Belgium and Spain) through estimation for each State based on corresponding panel data from 1996 to 2010. Furthermore, we estimate the debt model using a joint sample, consolidating conclusions on the most influential variables in terms of public debt. A comparative analysis of institutional frameworks in Europe shows that relationships between central and sub-central tax authorities have common traits, although the extent of change in each country remains unknown. In sum, this study shows that sub-sovereign government budgets are counter-cyclical, that ec…