S. Huschens, A. Karmann, Dominik Maltritz, Konstantin Vogl
We address the problem how to estimate default probabilities for sovereign countries based on market data of traded debt. A structural Merton-type model is applied to a sample of emerging market and transition countries. In this context, only few and heterogeneous default probabilities are derived, which is problematic for backtesting. To deal with this problem, we construct likelihood ratio test statistics and quick backtesting procedures.
{"title":"Country Default Probabilities: Assessing and Backtesting","authors":"S. Huschens, A. Karmann, Dominik Maltritz, Konstantin Vogl","doi":"10.2139/ssrn.965701","DOIUrl":"https://doi.org/10.2139/ssrn.965701","url":null,"abstract":"We address the problem how to estimate default probabilities for sovereign countries based on market data of traded debt. A structural Merton-type model is applied to a sample of emerging market and transition countries. In this context, only few and heterogeneous default probabilities are derived, which is problematic for backtesting. To deal with this problem, we construct likelihood ratio test statistics and quick backtesting procedures.","PeriodicalId":247622,"journal":{"name":"ERN: Fiscal & Monetary Policy in Developing Economies (Topic)","volume":"114 3","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-02-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114031806","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Spanish Abstract: Los estados y municipios de la federacion brasilena tienen considerable autonomia en la generacion directa del ingreso tributario y en la asignacion de los recursos publicos, aunque esto no obedezca a un proceso planificado de descentralizacion fiscal. La mejora de los indicadores fiscales de los gobiernos subnacionales a partir de la Ley de Responsabilidad Fiscal contribuyo en gran medida al exito de la politica de estabilidad macroeconomica. No obstante, la Federacion antepone obstaculos a la realizacion de una reforma del sistema tributario. Con el objeto de contribuir al debate sobre el equilibrio federativo en la division de las responsabilidades fiscales, el presente trabajo ofrece un diagnostico del cuadro federativo y de los cambios institucionales recientes, y propone una nueva agenda federativa.English Abstract: States and municipalities of the Brazilian Federation have considerable autonomy in raising their own tax income and the allocation of public funds, this is not the outcome of a planned process of fiscal decentralization. The improvement in fiscal indicators of subnational governments from Fiscal Responsibility Act contributed greatly to the success of the policy of macroeconomic stability. However, the Federation puts obstacles to the realization of a reform of the tax system. In order to contribute to the debate on federative balance in the division of fiscal responsibilities, this paper presents an analysis of the federative framework and recent institutional changes, and proposes a new federative agenda.
{"title":"El Federalismo Fiscal En Brasil: Una Visión Panorámica (The Fiscal Federalism in Brazil: A Panoramic Overview)","authors":"J. R. Afonso, J. Serra","doi":"10.18356/427108ee-es","DOIUrl":"https://doi.org/10.18356/427108ee-es","url":null,"abstract":"Spanish Abstract: Los estados y municipios de la federacion brasilena tienen considerable autonomia en la generacion directa del ingreso tributario y en la asignacion de los recursos publicos, aunque esto no obedezca a un proceso planificado de descentralizacion fiscal. La mejora de los indicadores fiscales de los gobiernos subnacionales a partir de la Ley de Responsabilidad Fiscal contribuyo en gran medida al exito de la politica de estabilidad macroeconomica. No obstante, la Federacion antepone obstaculos a la realizacion de una reforma del sistema tributario. Con el objeto de contribuir al debate sobre el equilibrio federativo en la division de las responsabilidades fiscales, el presente trabajo ofrece un diagnostico del cuadro federativo y de los cambios institucionales recientes, y propone una nueva agenda federativa.English Abstract: States and municipalities of the Brazilian Federation have considerable autonomy in raising their own tax income and the allocation of public funds, this is not the outcome of a planned process of fiscal decentralization. The improvement in fiscal indicators of subnational governments from Fiscal Responsibility Act contributed greatly to the success of the policy of macroeconomic stability. However, the Federation puts obstacles to the realization of a reform of the tax system. In order to contribute to the debate on federative balance in the division of fiscal responsibilities, this paper presents an analysis of the federative framework and recent institutional changes, and proposes a new federative agenda.","PeriodicalId":247622,"journal":{"name":"ERN: Fiscal & Monetary Policy in Developing Economies (Topic)","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114955448","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2006-12-01DOI: 10.1111/j.1467-9701.2006.00867.x
Craig R. Parsons, Kiyotaka Sato
Exporter's price-setting behaviour and currency invoicing play a key role in the literature on the new open-economy macroeconomics. This paper estimates exchange rate pass-through coefficients for the exports of four ASEAN countries: Indonesia, Malaysia, the Philippines and Thailand. In addition, previous estimates of pass-through as well as invoicing behaviour in East Asia are discussed in the context of regional integration. The new pass-through coefficients are estimated under two alternate specifications for up to 34 goods for each of the four ASEAN countries destined for up to 13 major markets. The results suggest: (a) little pass-through is occurring in Southeast Asia and (b) this lack of pass-through is more likely attributable to the fact that they are small countries in a relatively integrated market, rather than evidence of pricing to market. The implications for regional monetary integration of this apparently low degree of pass-through are detailed.
{"title":"Exchange Rate Pass-Through and Currency Invoicing: Implications for Monetary Integration in East Asia","authors":"Craig R. Parsons, Kiyotaka Sato","doi":"10.1111/j.1467-9701.2006.00867.x","DOIUrl":"https://doi.org/10.1111/j.1467-9701.2006.00867.x","url":null,"abstract":"Exporter's price-setting behaviour and currency invoicing play a key role in the literature on the new open-economy macroeconomics. This paper estimates exchange rate pass-through coefficients for the exports of four ASEAN countries: Indonesia, Malaysia, the Philippines and Thailand. In addition, previous estimates of pass-through as well as invoicing behaviour in East Asia are discussed in the context of regional integration. The new pass-through coefficients are estimated under two alternate specifications for up to 34 goods for each of the four ASEAN countries destined for up to 13 major markets. The results suggest: (a) little pass-through is occurring in Southeast Asia and (b) this lack of pass-through is more likely attributable to the fact that they are small countries in a relatively integrated market, rather than evidence of pricing to market. The implications for regional monetary integration of this apparently low degree of pass-through are detailed.","PeriodicalId":247622,"journal":{"name":"ERN: Fiscal & Monetary Policy in Developing Economies (Topic)","volume":"59 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114726090","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2006-10-01DOI: 10.5089/9781451864953.001
Rodolphe Blavy
The paper analyzes Jamaica's experience of low growth despite consistently high investment. Cross-country analysis provides evidence of a significant and negative relationship between total public debt and productivity growth. Looking at the specific channels through which high debt affects productivity growth and the allocation of resources in Jamaica, the study finds that high public debt has been associated with macroeconomic uncertainty and an output structure that relied excessively on a few maturing sectors with limited scope for productivity growth. Furthermore, public investment has been crowded out by debt service, further adversely affecting productivity growth.
{"title":"Public Debt and Productivity: The Difficult Quest for Growth in Jamaica","authors":"Rodolphe Blavy","doi":"10.5089/9781451864953.001","DOIUrl":"https://doi.org/10.5089/9781451864953.001","url":null,"abstract":"The paper analyzes Jamaica's experience of low growth despite consistently high investment. Cross-country analysis provides evidence of a significant and negative relationship between total public debt and productivity growth. Looking at the specific channels through which high debt affects productivity growth and the allocation of resources in Jamaica, the study finds that high public debt has been associated with macroeconomic uncertainty and an output structure that relied excessively on a few maturing sectors with limited scope for productivity growth. Furthermore, public investment has been crowded out by debt service, further adversely affecting productivity growth.","PeriodicalId":247622,"journal":{"name":"ERN: Fiscal & Monetary Policy in Developing Economies (Topic)","volume":"50 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114981378","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
According to reputation models of sovereign debt, the incentives to repay are proportional to the income insurance benefits provided by access to international markets. This paper, however, documents that private net lending to developing countries exhibits a procyclical or acyclical pattern, contradicting this premise. By contrast, official debt net flows exhibit a countercyclical patter. In addition, the paper shows that (both current and past) defaults are associated with lower net debt flows. The findings, which are robust to various additional controls, cast doubt on the reputation view of sovereign debt markets. At the same time, they suggest that reputation may account for the success of the (implicit) preferred creditor status enjoyed by multilateral lenders.
{"title":"Optimal Debt? On the Insurance Value of International Debt Flows to Developing Countries","authors":"Eduardo Levy-Yeyati","doi":"10.2139/ssrn.940468","DOIUrl":"https://doi.org/10.2139/ssrn.940468","url":null,"abstract":"According to reputation models of sovereign debt, the incentives to repay are proportional to the income insurance benefits provided by access to international markets. This paper, however, documents that private net lending to developing countries exhibits a procyclical or acyclical pattern, contradicting this premise. By contrast, official debt net flows exhibit a countercyclical patter. In addition, the paper shows that (both current and past) defaults are associated with lower net debt flows. The findings, which are robust to various additional controls, cast doubt on the reputation view of sovereign debt markets. At the same time, they suggest that reputation may account for the success of the (implicit) preferred creditor status enjoyed by multilateral lenders.","PeriodicalId":247622,"journal":{"name":"ERN: Fiscal & Monetary Policy in Developing Economies (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127914817","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2006-08-01DOI: 10.1111/j.1467-9361.2006.00364.x
A. M. Morshed, S. Turnovsky
Empirical evidence suggests (i) that the real exchange rates of developing economies show less persistence than do those of more advanced economies, and (ii) that the elasticity of substitution between capital and labor tends to increase from below unity for less developed economies to above one for more advanced economies. This paper shows how the introduction of sectoral adjustment costs in a two-sector model of a small open economy, together with CES production functions, provides a very natural explanation of this empirical regularity. Other aspects of the relationship between the technologies and the speed of convergence of the real exchange rate are also discussed.
{"title":"Elasticity of Substitution and the Persistence of the Deviation of the Real Exchange Rates","authors":"A. M. Morshed, S. Turnovsky","doi":"10.1111/j.1467-9361.2006.00364.x","DOIUrl":"https://doi.org/10.1111/j.1467-9361.2006.00364.x","url":null,"abstract":"Empirical evidence suggests (i) that the real exchange rates of developing economies show less persistence than do those of more advanced economies, and (ii) that the elasticity of substitution between capital and labor tends to increase from below unity for less developed economies to above one for more advanced economies. This paper shows how the introduction of sectoral adjustment costs in a two-sector model of a small open economy, together with CES production functions, provides a very natural explanation of this empirical regularity. Other aspects of the relationship between the technologies and the speed of convergence of the real exchange rate are also discussed.","PeriodicalId":247622,"journal":{"name":"ERN: Fiscal & Monetary Policy in Developing Economies (Topic)","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117141697","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article examines recent and potential reforms in India’s fiscal federal system. We summarize key federal institutions in India, including tax and expenditure assignments, and mechanisms for Center-state transfers. We discuss the institutional process by which reforms can and do take place, including the role of academics, political influences, and especially institutions such as the Finance Commission. In contrast to the past, recent commissions have played a greater role in articulating an agenda for fiscal federal reform, which then proceeds through political bargaining. This change has taken place in the context of, and been influenced by, broader economic reform in India.
{"title":"The Political Economy of India's Fiscal Federal System and its Reform","authors":"M. Rao, Nirvikar Singh","doi":"10.2139/ssrn.950327","DOIUrl":"https://doi.org/10.2139/ssrn.950327","url":null,"abstract":"This article examines recent and potential reforms in India’s fiscal federal system. We summarize key federal institutions in India, including tax and expenditure assignments, and mechanisms for Center-state transfers. We discuss the institutional process by which reforms can and do take place, including the role of academics, political influences, and especially institutions such as the Finance Commission. In contrast to the past, recent commissions have played a greater role in articulating an agenda for fiscal federal reform, which then proceeds through political bargaining. This change has taken place in the context of, and been influenced by, broader economic reform in India.","PeriodicalId":247622,"journal":{"name":"ERN: Fiscal & Monetary Policy in Developing Economies (Topic)","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114418509","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The main objective of this paper is to study the relationship between real exchange rates dynamic and debt in developing countries. Two kinds of definition of debt sustainability are used for study the impact of external debt on real exchange rates. The main surplus of this study is to introduce "strong version" of debt sustainability for the determination of the equilibrium real exchange rates. The "strong version" of debt sustainability is obtained with the conclusions of "debt overhang" theory in developing countries.
{"title":"Real Exchange Rates Dynamic and Debt Sustainability in Developing Countries","authors":"Babacar Séne","doi":"10.2139/SSRN.655901","DOIUrl":"https://doi.org/10.2139/SSRN.655901","url":null,"abstract":"The main objective of this paper is to study the relationship between real exchange rates dynamic and debt in developing countries. Two kinds of definition of debt sustainability are used for study the impact of external debt on real exchange rates. The main surplus of this study is to introduce \"strong version\" of debt sustainability for the determination of the equilibrium real exchange rates. The \"strong version\" of debt sustainability is obtained with the conclusions of \"debt overhang\" theory in developing countries.","PeriodicalId":247622,"journal":{"name":"ERN: Fiscal & Monetary Policy in Developing Economies (Topic)","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2005-02-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130822062","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The authors argue that emerging economies borrow short term due to the high risk premium charged by international capital markets on long-term debt. They first present a model where the debt maturity structure is the outcome of a risk-sharing problem between the government and bondholders. By issuing long-term debt, the government lowers the probability of a liquidity crisis, transferring risk to bondholders. In equilibrium, this risk is reflected in a higher risk premium and borrowing cost. Therefore, the government faces a tradeoff between safer long-term borrowing and cheaper short-term debt. Second, the authors construct a new database of sovereign bond prices and issuance. They show that emerging economies pay a positive term premium (a higher risk premium on long-term bonds than on short-term bonds). During crises, the term premium increases, with issuance shifting toward shorter maturities. This suggests that changes in bondholders' risk aversion are important to understand emerging market crises.
{"title":"Why Do Emerging Economies Borrow Short Term?","authors":"F. Broner, G. Lorenzoni, S. Schmukler","doi":"10.2139/ssrn.859604","DOIUrl":"https://doi.org/10.2139/ssrn.859604","url":null,"abstract":"The authors argue that emerging economies borrow short term due to the high risk premium charged by international capital markets on long-term debt. They first present a model where the debt maturity structure is the outcome of a risk-sharing problem between the government and bondholders. By issuing long-term debt, the government lowers the probability of a liquidity crisis, transferring risk to bondholders. In equilibrium, this risk is reflected in a higher risk premium and borrowing cost. Therefore, the government faces a tradeoff between safer long-term borrowing and cheaper short-term debt. Second, the authors construct a new database of sovereign bond prices and issuance. They show that emerging economies pay a positive term premium (a higher risk premium on long-term bonds than on short-term bonds). During crises, the term premium increases, with issuance shifting toward shorter maturities. This suggests that changes in bondholders' risk aversion are important to understand emerging market crises.","PeriodicalId":247622,"journal":{"name":"ERN: Fiscal & Monetary Policy in Developing Economies (Topic)","volume":"28 4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130490923","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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