Rare Disasters, Financial Development, and Sovereign Debt
54 Pages Posted: 17 Sep 2018 Last revised: 25 May 2023
There are 2 versions of this paper
Rare Disasters, Financial Development, and Sovereign Debt
NBER Working Paper No. w25031
Number of pages: 54
Posted: 17 Sep 2018
Last Revised: 25 May 2023
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Rare Disasters, Financial Development, and Sovereign Debt
CEPR Discussion Paper No. DP13202
Number of pages: 56
Posted: 02 Oct 2018
Last Revised: 11 Feb 2021
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Date Written: September 2018
Abstract
We propose a model of sovereign debt in which countries vary in their level of financial development, defined as the extent to which they can issue debt denominated in domestic currency in international capital markets. We show that low levels of financial development generate the “debt intolerance” phenomenon that plagues emerging markets: it reduces overall debt capacity, increases credit spreads, and limits the country's ability to smooth consumption.
Suggested Citation: Suggested Citation
Tavares Rebelo, Sergio and Wang, Neng and Yang, Jinqiang, Rare Disasters, Financial Development, and Sovereign Debt (September 2018). NBER Working Paper No. w25031, Available at SSRN: https://ssrn.com/abstract=3250548
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