Information Frictions, Reputation, and Sovereign Spreads
Bibliographic Data
| ID | 10182124 |
|---|---|
| Authors | Juan Morelli (0009-0002-4466-5672, Federal Reserve Board of Governors), Juan M Morelli, Matías Moretti (Federal Reserve Board of Governors) |
| Year | 2023 |
| Volume | 131 |
| Issue | 11 |
| Pages | 3066-3102 |
| Publication date | 2023-03-29 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/724855 |
| OpenAlex | W4361218628 |
| Language | EN |
| References cited | 38 |
We formulate a reputational model in which the type of government is time varying and private information. Agents adjust their beliefs about the government’s type (i.e., reputation) using noisy signals about its policies. We consider a debt repayment setting in which reputation influences the market’s perceived probability of default, which affects sovereign spreads. We focus on the 2007–12 Argentine episode of inflation misreport to quantify how markets price reputation. We find that the misreports significantly increased Argentina’s sovereign spreads. We use those estimates to discipline our model and show that reputation can have long-lasting effects on a government’s borrowing costs
Business · Economics · Financial economics · Monetary economics · Political science · Politics · Reputation · Sovereignty · Banking stability, regulation, efficiency · Corruption and Economic Development · Global Financial Crisis and Policies · Law
| Highly cited | No |
|---|