Rational Liquidity Crises in the Sovereign Debt Market: In Search of a Theory
This paper studies under what circumstances creditworthy sovereign borrowers may be denied liquidity by rational creditors. It is shown that, when the creditor side of the market consists of many small investors there may be multiple rational expectations equilibria. In one equilibrium, creditors...
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Format: | Elektronisch E-Book |
Sprache: | English |
Veröffentlicht: |
Washington, D.C
International Monetary Fund
1996
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Schriftenreihe: | IMF Working Papers
Working Paper No. 96/38 |
Online-Zugang: | UBW01 UEI01 LCO01 SBR01 UER01 SBG01 UBG01 FAN01 UBT01 FKE01 UBY01 UBA01 FLA01 UBM01 UPA01 UBR01 FHA01 FNU01 BSB01 TUM01 Volltext |
Zusammenfassung: | This paper studies under what circumstances creditworthy sovereign borrowers may be denied liquidity by rational creditors. It is shown that, when the creditor side of the market consists of many small investors there may be multiple rational expectations equilibria. In one equilibrium, creditors' pessimistic expectations about the borrower's creditworthiness become self-fulfilling, and the borrower experiences a liquidity crisis. Multiple equilibria can be avoided by marketing the loan appropriately or by developing a reputation for following good policies. Liquidity problems can also arise because of the temporary disruption of international bond markets due to events unrelated to the borrower's circumstances. Policies responses are discussed |
Beschreibung: | 1 Online-Ressource (32 p) |
ISBN: | 1451845642 9781451845648 |
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spelling | Detragiache, Enrica Verfasser aut Rational Liquidity Crises in the Sovereign Debt Market In Search of a Theory Detragiache, Enrica Washington, D.C International Monetary Fund 1996 1 Online-Ressource (32 p) txt rdacontent c rdamedia cr rdacarrier IMF Working Papers Working Paper No. 96/38 This paper studies under what circumstances creditworthy sovereign borrowers may be denied liquidity by rational creditors. It is shown that, when the creditor side of the market consists of many small investors there may be multiple rational expectations equilibria. In one equilibrium, creditors' pessimistic expectations about the borrower's creditworthiness become self-fulfilling, and the borrower experiences a liquidity crisis. Multiple equilibria can be avoided by marketing the loan appropriately or by developing a reputation for following good policies. Liquidity problems can also arise because of the temporary disruption of international bond markets due to events unrelated to the borrower's circumstances. Policies responses are discussed Online-Ausg http://elibrary.imf.org/view/IMF001/05534-9781451845648/05534-9781451845648/05534-9781451845648.xml Verlag URL des Erstveröffentlichers Volltext |
spellingShingle | Detragiache, Enrica Rational Liquidity Crises in the Sovereign Debt Market In Search of a Theory |
title | Rational Liquidity Crises in the Sovereign Debt Market In Search of a Theory |
title_auth | Rational Liquidity Crises in the Sovereign Debt Market In Search of a Theory |
title_exact_search | Rational Liquidity Crises in the Sovereign Debt Market In Search of a Theory |
title_exact_search_txtP | Rational Liquidity Crises in the Sovereign Debt Market In Search of a Theory |
title_full | Rational Liquidity Crises in the Sovereign Debt Market In Search of a Theory Detragiache, Enrica |
title_fullStr | Rational Liquidity Crises in the Sovereign Debt Market In Search of a Theory Detragiache, Enrica |
title_full_unstemmed | Rational Liquidity Crises in the Sovereign Debt Market In Search of a Theory Detragiache, Enrica |
title_short | Rational Liquidity Crises in the Sovereign Debt Market |
title_sort | rational liquidity crises in the sovereign debt market in search of a theory |
title_sub | In Search of a Theory |
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