Resource title

Debt maturity without commitment

Resource image

image for OpenScout resource :: Debt maturity without commitment

Resource description

I analyze how lack of commitment affects the maturity structure of sovereign debt. Governments balance benefits of default induced redistribution and costs due to income losses in the wake of a default. Their choice of short- versus long-term debt affects default and rollover decisions by subsequent policy makers. The equilibrium maturity structure is shaped by revenue losses on inframarginal units of debt that reflect the price impact of these decisions. The model predicts an interior maturity structure with positive gross positions and a shortening of the maturity structure when debt issuance is high, output low, or a cross default more likely. These predictions are consistent with empirical evidence.

Resource author

Dirk Niepelt

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/26545

Resource license

Adapt according to the presented license agreement and reference the original author.