| This dissertation examines issues on sovereign debt from an empirical and theoretical perspective. The first two chapters focus on the econometric estimation of the Argentinean term structure and default probabilities from observed market prices, whereas, in the last chapter, we consider a model of self-fulfilling sovereign debt crises and numerically compute the government's optimal debt management policy.;Chapter 1, "Estimating the Argentinean Term Structure: A Reduced-Form Approach" provides estimates of default spreads and the term structure for Argentina by using the reduced-form credit framework. The fitted default spreads mimic the movement of other country risk benchmarks, with less data requirements. Solvency- and liquidity-related factors, such as Debt/GDP ratios and net debt amortization payments, respectively, are significant at explaining variation in default spreads. International financial crises cause shifts in Argentinean yield curves, with higher increases in short-term rates; as the effect of a crisis vanishes, the yield curve returns to its pre-crisis level.;Chapter 2, "Argentinean Default Spreads, Default Probabilities and the Pricing of Eurobonds", employs monthly interpolated data to find that besides liquidity- and solvency-related factors, contagious effects from other default crises are also significant at explaining Argentinean default spreads variation. We compute the term structure of default probabilities and find that at the peak of external default crises, Argentinean short-term default rates sharply increase, leading to inverted term structures of default probabilities, becoming hump-shaped when the crises vanish. The model predicts well the prices of bonds with maturities closer to that of the bond used in the estimation, but does poorly at predicting prices of longer-maturity bonds. Chapter 3, "Self-Fulfilling Confidence Crises and Optimal Debt Management", considers a model of self-fulfilling sovereign debt crises. We numerically compute the government's optimal debt policy and show that it should get out of the crisis zone by reducing the stock of debt to a level b, for which default never occurs. This debt reduction process may not be carried out immediately, since the government has to balance its costs (higher distortionary taxes) and benefits (higher revenues from bond sales). |
