Date of Award




Document Type


Degree Name

Doctor of Philosophy (PhD)


Department of Economics

Content Description

1 online resource (xii, 111 pages) : illustrations (some color)

Dissertation/Thesis Chair

Betty Daniel

Committee Members

Yue Li, Zhongwen Liang


Default (Finance), State bonds, Business cycles, Finance, Public, Foreign exchange rates

Subject Categories



The first chapter examines the quantitative performance between two models of sovereign default, which we define as a government (sovereign) default on government bonds. The two models are the strategic default model and a model designed for rich countries in which default is due to inability to repay. We first examine the cyclicality of fiscal policy for sixteen emerging countries which have experienced default using a two-step GMM estimator, and found that the fiscal policy in these countries is counter cyclical. We choose Argentina as a reference economy, and compare the implications of both models for matching the data on the sovereign default facts, the cyclical behavior of sovereign debt, the behavior of debt leading up to a crisis, and the business cycles. The results suggest that the latter is more relevant to explain Argentine default of 2001, i.e. the model can account for the counter cyclical public borrowing, the timing of default, the high debt to GDP ratio, debt reduction, and high volatility bond spreads around debt crisis. We further show that the inability to pay default model with trend shock can match the business cycles facts for Argentina such as counter cyclical current account and highly volatile consumption to output ratio, but sacrifices matching observed default facts such as “haircuts" and the volatility of bond spreads near crisis.

Included in

Economics Commons