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Sovereign Debt Disclosure

Author

Listed:
  • Bulent Guler
  • Yasin Kürsat Önder
  • Temel Taskin

Abstract

This paper studies debt and default dynamics under alternative disclosure arrangements in a sovereign default model. The government can access both observable and hidden debt. We show, both theoretically and quantitatively, that when debt is not fully disclosed, the government does not internalize the full effects of hidden debt choices on bond prices, thereby reducing the cost of holding hidden debt. We find that switching to a full disclosure regime shifts the portfolio from hidden to observable debt, exacerbating the debt dilution problem. Thus, contrary to conventional wisdom, this switch generates welfare losses.

Suggested Citation

  • Bulent Guler & Yasin Kürsat Önder & Temel Taskin, 2024. "Sovereign Debt Disclosure," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 24/1094, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:24/1094
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    File URL: http://wps-feb.ugent.be/Papers/wp_24_1094.pdf
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    More about this item

    Keywords

    Hidden debt; Debt disclosure; Sovereign debt; Sovereign default; Sovereign-to- sovereign lending;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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