Financial stress and sovereign debt composition

Luca Agnello, Vitor Castro, João Tovar Jalles, Ricardo M. Sousa

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Using a panel of 13 advanced economies for the period 1980–2012, we find that periods of impaired financial intermediation mainly accrue to maturity mismatches in sovereign debt. Thus, a higher (lower) share of short-term (medium and long-term) debt leads to an increase in the financial stress index. From a policy perspective, our work suggests that debt management policies translated into longer average maturities of sovereign debt not only reduce the expected debt servicing cost, but also mitigate strains in the financial sector.

Original languageEnglish
Pages (from-to)678-683
Number of pages6
JournalApplied Economics Letters
Volume23
Issue number9
DOIs
Publication statusPublished - 12 Jun 2016

Keywords

  • currency
  • Financial stress
  • holders
  • marketability
  • maturity
  • sovereign debt composition

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