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Questions tagged [default]

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Consequences of a US sovereign default

The US Treasury website states: Failing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its legal obligations – an ...
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1answer
38 views

What can explain increasing exports after default episodes?

I am going through a paper on sovereign default by Mendoza and Yue (2012), in which defaults are explained in terms of how firms that use foreign intermediate inputs lose access to international ...
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How to determine the default probability of a county in a bond that is not in its native currency?

Consider the following case: Country P uses the currency Euro and gives p percent interest on a one year bond issued in Euro. Country Q uses the currency TL and gives q percent interest on a one ...
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1answer
205 views

What is the fundamental problem with Pakistan's economy?

Why is Pakistan repeatedly defaulting? 2008 - Pakistan seeks USD9 billion IMF bailout to avert crisis 2013 - Saudi Arabia come to Pakistan’s Rescue with USD15 Billion Energy Bailout Deal 2014 - ...
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1answer
392 views

Why obligation acceleration triggers Credit-Default Swaps (CDS)?

ISDA Credit Event definitions state that CDS can be triggered in an event of Obligation Acceleration. What does that mean? If for example, a country pays a bond 1 year prior to maturity are CDS ...
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1answer
112 views

Swaps and systemic risk

I understand the systemic risk that can be associated with the trading of credit default swaps, but is it the same with interest rate swaps? What was the "default rate" on interest rate swaps during ...
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1answer
79 views

Argentine default: “Rights upon future offers”

Argentina defaulted on its sovereign debt in 2002. It has reached an agreement with most but not all of its creditors. Wikipedia has a pretty good summary. The agreements included a 70% hair cut but ...
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1answer
42 views

Why do Latin American countries fare among the worst at managing inflation

Does it have to do with cultural factors? Ex: they were colonies of Spain and Portugal who themselves are not that great at managing their economies relative to other western European countries.
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63 views

Regression on default rates and backward extrapolation

Suppose that we have bankruptcy data representative for Small and Medium-sized enterprises in a country. We can therefore calculate default rates. Furthermore suppose that we found that GDP, ...
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Lack of historical data for calibration of probability of default

It is a known fact that default rates seem to exhibit cyclic behavior. Most probability of default models use one-year averages of default rates to calibrate the models. The one-year averages should ...
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2answers
347 views

Why would a government bail out private banks?

If the private banks never learn from history and keep giving credits to it's clients for overpriced acquisitions, and then they enter default why would the government give them free money or buy ...
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3answers
455 views

If I don't pay a debt, then the creditor takes my goods. Why, then, do Greek creditors not take Greece?

Normally, when you don't pay a debt, your creditors take your goods (house, car, etc...). If Greece cannot pay its debt, can its creditors take Greek goods (structures, cities, industries, lands, etc....
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4answers
310 views

Greece default and why are US States not seen defaulting?

Reading various articles, it is clear that Greece is in the situation simply due to the fact that they have indulged in overspending on their national budget for over a decade, and with the 2008 ...
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36 views

Any serious macro models for Greece's possible default or eurozone exit?

Since each news outlet says something about Greece these days, I wonder what serious economic research backs decisions made over the last seven years? The IMF papers on austerity, both early ones and ...
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2answers
78 views

Greek default versus Euro exit

Talk about Greece leaving the Euro has been reignited by the recent election of Syrzia, with some again talking about how it is practically inevitable. Why are these people viewing a Greek default as ...
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2answers
543 views

What is the difference betwene a partial default and having debts partially written off?

From The Daily Telegraph: The new Syriza-led government has demanded some form debt write-off on the country's €317bn liabilities, two-thirds of which are owned to official creditors in the form of ...