Related papers: Borrowing Constraints in Emerging Markets
This paper outlines a critical gap in the assessment methodology used to estimate the macroeconomic costs and benefits of climate policy. It shows that the vast majority of models used for assessing climate policy use assumptions about the…
We study the relationship between foreign debt and GDP growth using a panel dataset of 50 countries from 1997 to 2015. We find that economic growth correlates positively with foreign debt and that the relationship is causal in nature by…
We estimate the causal effect of external debt on greenhouse gas emissions in a panel of 78 emerging market and developing economies over the 1990-2015 period. Unlike previous literature, we use external instruments to address the potential…
Measuring the contribution of a bank or an insurance company to overall systemic risk is a key concern, particularly in the aftermath of the 2007--2009 financial crisis and the 2020 downturn. In this paper, we derive worst-case and…
A macroeconomic model based on the economic variables (i) assets, (ii) leverage (defined as debt over asset) and (iii) trust (defined as the maximum sustainable leverage) is proposed to investigate the role of credit in the dynamics of…
In our model, private actors with interbank cash flows similar to, but nore general than (Carmona, Fouque, Sun, 2013) borrow from the outside economy at a certain interest rate, controlled by the central bank, and invest in risky assets.…
We present a detailed analysis of interest rate derivatives valuation under credit risk and collateral modeling. We show how the credit and collateral extended valuation framework in Pallavicini et al (2011), and the related collateralized…
Changes in collateralization have been implicated in significant default (or near-default) events during the financial crisis, most notably with AIG. We have developed a framework for quantifying this effect based on moving between…
The market practice of extrapolating different term structures from different instruments lacks a rigorous justification in terms of cash flows structure and market observables. In this paper, we integrate our previous consistent theory for…
The fast-growing Emerging Market (EM) economies and their improved transparency and liquidity have attracted international investors. However, the external price shocks can result in a higher level of volatility as well as domestic policy…
We analyze the sovereign bond issuance data of eight major emerging markets (EMs) - Brazil, China, India, Indonesia, Mexico, Russia, South Africa and Turkey from 1970 to 2018. Our analysis suggests that (i) EM local currency bonds tend to…
This study investigates the extent to which local public equity indices can statistically hedge real purchasing power loss during compounded structural macro-financial collapses in emerging markets. We employ a non-linear multiplicative…
This paper shows that utilizing information on the extensive margin of financially constrained households can narrow down the set of admissible preferences in a large class of macroeconomic models. Estimates based on Spanish aggregate data…
We consider a model of debt management, where a sovereign state trade some bonds to service the debt with a pool of risk-neutral competitive foreign investors. At each time, the government decides which fraction of the gross domestic…
In this paper, we consider three problems related to survival, growth, and goal reaching maximization of an investment portfolio with proportional net cash flow. We solve the problems in a market constrained due to borrowing prohibition. To…
We investigate the consequences of legal rulings on the conduct of monetary policy. Several unconventional monetary policy measures of the European Central Bank have come under scrutiny before national courts and the European Court of…
Standard macroeconomic frameworks have correctly identified Japan's government debt - now exceeding 240% of GDP - as carrying substantial fiscal risk. Yet FRED data from 2013 to 2026 present an empirical record inviting a complementary…
This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized…
The rapid growth of sustainable investing, now exceeding 35 trillion USD globally, has transformed financial markets, yet the implications for monetary policy transmission remain underexplored. While existing literature documents…
This article introduces a new mathematical concept of illiquidity that goes hand in hand with credit risk. The concept is not volume- but constraint-based, i.e., certain assets cannot be shorted and are ineligible as num\'eraire. If those…