Risk Sharing and Contingent Debt
Background:
This is an economics based research project aimed at better understanding the manner in which governments and countries share risk between themselves. This research project will be pursued jointly with Professor Albert Marcet of Universitat Pompeu Fabra.
This project will build on earlier ESRC funded work by the researcher (which was also carried out jointly with Professor Marcet) and aims to extend the previous research in several directions as follows: (i) to consider how governments can issue bonds of different maturities to help achieve better risk insurance against fiscal shocks and the limitations of this approach; (ii) to extend their analysis of incomplete markets to global capital markets and provide simple tests of the degree of market incompleteness; (iii) to investigate why markets are incomplete and why developing countries can borrow relatively small amounts but OECD nations a great deal; (iv) studying the interconnections between debt default, contingent debt and debt limits (v) to use this framework to see if IMF and private sector lending can be structured in a different way so as to shift the focus from ex post restructuring of debt to ex ante lending based on state contingent events.
Researchers:
Dr Andrew Scott
London Business School
Contact:
Dr Andrew Scott
Department of Economics
London Business School
Regents Park
London
NW1 4SA
Tel: 020 7262 5050
email: ascott@london.edu
Duration of Research:
March 2005 - February 2008