IMF paper says long-term debt creates ‘incentive to default’
Research considers maturity structure of sovereign debt portfolios
Uncertainty about the future fundamentals of the economy leads sovereigns to issue a greater proportion of long-term debt, which in turn increases the likelihood of default, according to a working paper published by the IMF on September 12.
In Optimal maturity structure of sovereign debt in situation of near default, Gabriel Desgranges and Céline Rochon study the relationship between the maturity structure of sovereign debt portfolios with their probability of default.
The authors find that long
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