Journal ArticleDOI
If Boilerplate Could Talk
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This article investigated the role of stickiness in sovereign bond contracts, where it would be especially costly and therefore puzzling in their interviews with more than a hundred officials responsible for the bond contracts of 28 countries, they linked reluctance to change non-financial contract terms and the imperative of following a market standard for such terms.Abstract:
Standard contract terms are “sticky”: they rarely change, even if change appears to be in the parties’ interest Multiple theories to explain stickiness do not reach consensus on its causes We investigate the role of stickiness in sovereign bond contracts, where it would be especially costly and therefore puzzling In our interviews with more than a hundred officials responsible for the bond contracts of 28 countries, they linked reluctance to change non-financial contract terms and the imperative of following a “market standard” for such terms When a term could be described as standard for the government’s debt stock or borrower cohort, its content often came across as secondary Sovereign debt managers seemed willing to forgo some of the benefits of contract terms for dealing with contingencies and revealing private information, to avoid negative signals and maintain the liquidity of primary and secondary debt markets Interviews with investors suggested a similar focus on standard form, and a limited engagement with contract contentread more
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The Search for a Euro Area Safe Asset
TL;DR: In this paper, the authors evaluate four approaches to creating "safe assets" or asset portfolios for the euro area: (1) a diversified portfolio of senior tranches of sovereign debt ("national tranching"), (2) a senior security backed by a diversification pool of national sovereign debt, (3) debt issued by a senior financial intermediary, and (4) debt issue by a euro area budget or a leveraged wealth fund, based on member state contributions or dedicated direct revenue sources.
Journal ArticleDOI
Managing Deep Debt Crises in the Euro Area: Towards a Feasible Regime
TL;DR: The authors argues that hard criteria are error prone, may trigger crises in high debt countries, and lack credibility when the economic costs of debt restructurings are high, and instead, the key to a credible debt restructuring framework is to reduce these costs, by cutting the links between sovereigns and banks and putting safety nets in place that limit contagion.
Journal ArticleDOI
Contracts of Inattention
Marcel Kahan,G. Mitu Gulati +1 more
TL;DR: In this paper, the authors examine the aftermath of a famous 2016 case, Wilmington Savings Fund v. Cash America, and find evidence of a phenomenon in contracts that involves sophisticated parties who are nevertheless not represented by their own lawyers, lack full awareness of the fine print of the contractual terms, and may be eclectic as to their meaning when they enter into these contracts.
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Lenders’ Roles and Responsibilities in Sovereign Debt Markets
TL;DR: In this article, the authors show that sovereign debt has as much or more in common with consumer debt than with corporate debt, and reveal gaps in the debate over how to reform sovereign debt markets.
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When Governments Promise to Prioritize Public Debt: Do Markets Care?
TL;DR: In this paper, the authors examined the impact of constitutional priority promises on Spanish sovereign bond yields during the Euro sovereign debt crisis and found no evidence that this reform had any impact on Spanish bond yields.
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