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- W2298860695 abstract "It is shown in a standard quantitative model of sovereign debt and default that sentiment shocks can alterthe distribution of fundamental defaults. The channel through which this occurs is a new type of dynamiclender coordination problem in sovereign debt markets that I call a dynamic panic. During a dynamicpanic of this kind, expectations of future negative investor sentiments dilute the price of long-term debt;the sovereign's optimal response to such a panic can be to borrow aggressively, which justifies investors'fears of dilution. Such panics generate naturally many of the unique features the recent Eurozone crisis,and so I explore policy implications in this environment. I find that rate ceilings are an ineffective policytool but that liquidity provision, appropriately implemented, can eliminate such panics." @default.
- W2298860695 created "2016-06-24" @default.
- W2298860695 creator A5023168355 @default.
- W2298860695 date "2015-04-14" @default.
- W2298860695 modified "2023-09-27" @default.
- W2298860695 title "Dynamic Panics: Theory and Application to the Eurozone" @default.
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