English, Article, Journal or magazine article edition: Observing bailout expectations during a total eclipse of the sun Oscar Bernal; Kim Oosterlinck; Ariane Szafarz

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Bookmark: http://trove.nla.gov.au/version/111220
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Observing bailout expectations during a total eclipse of the sun
Author
  • Oscar Bernal
  • Kim Oosterlinck
  • Ariane Szafarz
Physical Description
  • preprint
Notes
  • Exploiting an exceptional historical example, this paper proposes an original method to address the existence of sovereign creditor moral hazard. As the coronas which are observable only during a total eclipse of the sun, market-specific prices of repudiated bonds are observable only when extreme conditions (a war, in this instance) segment the markets. Such events are very rare but insightful as they allow for isolating pure country-specific bailout expectations. The paper shows that bailouts do indeed create creditor moral hazard. Based on an impulse response analysis, the econometric results further emphasize the influence of bailout expectations in sovereign bonds valuation.
  • RePEc:dul:wpaper:09-01rs
  • The literature has not reached a consensus yet regarding the existence of sovereign creditor moral hazard. Exploiting an exceptional historical example, this paper proposes an original method to address this issue. As the corona which are observable only during a total eclipse of the sun, market-specific prices of repudiated bonds are observable only when extreme conditions (a war, in this instance) segment the markets. Such events are very rare but insightful as they allow for isolating pure country-specific bailout expectations. The paper shows that bailouts do create creditor moral hazard. Based on an impulse response analysis, the econometric results further emphasize the influence of bailout expectations in sovereign bonds valuation.
  • bailout, bonds, moral hazard, repudiation, sovereign debt, Soviet, Russia.
  • RePEc:sol:wpaper:08-015
Language
  • English
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