Sovereign Debt Contracts and Financial Stability in Emerging Market Economies

Hühnerbein, Ossip Robert (2007): Sovereign Debt Contracts and Financial Stability in Emerging Market Economies. Dissertation, LMU München: Faculty of Economics

Abstract

This thesis analyzes the influence sovereign debt contracts have on the incidence and the devolution of financial crises in emerging market economies. Chapter 2 focuses on the design of majority action clauses in bond contracts. It examines under what circumstances impeding creditor coordination might be a useful way to address debtor moral hazard concerns. In chapter 3 the pricing of sovereign bonds with various characteristics is studied. Special attention is drawn to the question of how the pricing of coordination clauses is affected by the composition of the debt. It is shown that coordination clauses are priced more favorably by the market the larger the share of coordinated debt by the respective issuer is. Chapter 4 investigates the scope for country insurance against macroeconomics shocks. Collateralizing sovereign bond contracts with financial derivatives is shown to be equivalent to indexing claims.

• Item Type: Theses (Dissertation, LMU Munich)
• Keywords: Sovereign Debt, Collective Action Clauses, Financial Crises, Coordination
• Subjects: 300 Social sciences; 300 Social sciences > 330 Economics
• Faculties: Faculty of Economics
• Language: English
• Date of oral examination: 24. January 2007
• 1. Referee: Illing, Gerhard
• Signature of the printed copy: 0001/UMC 16417