Sovereign risk matters: endogenous default risk and the time-varying volatility of interest rate spreads
Emerging markets’ interest rate spreads display substantial time-varying volatility. We show that models with endogenous sovereign default risk à la Eaton and Gersovitz (1981) can account for such volatility, even in the absence of shocks to the second moments of the exogenous stochastic variables....
| Main Authors: | , |
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| Format: | Journal article |
| Language: | English |
| Published: |
Elsevier
2021
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