{
  "title": "Pricing Sovereign Debt in Resource-Rich Economies",
  "publication": "IMF Working Papers, November 8, 2019",
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  "summary": "How do oil price movements affect sovereign spreads in an oil-dependent economy? I develop a stochastic general equilibrium model of an economy exposed to co-moving oil price and output processes, with endogenous sovereign default risk.",
  "sections": [
    {
      "heading": "Summary and research question",
      "content": "- Research question: How do oil price movements affect sovereign spreads in an oil-dependent economy?\n- Methodology: Develops a stochastic general equilibrium model of an economy exposed to co-moving oil price and output processes, with endogenous sovereign default risk.\n- Key claim: The model explains a large proportion of business cycle fluctuations in interest-rate spreads in oil-exporting emerging market economies, particularly the countercyclicallity of interest rate spreads and oil prices."
    },
    {
      "heading": "Main findings",
      "content": "- The model explains a large proportion of business cycle fluctuations in interest-rate spreads in oil-exporting emerging market economies.\n- The model accounts for the countercyclicallity of interest rate spreads and oil prices.\n- Factors that strengthen co-movements between risk premiums and the oil price:\n  - Higher risk-aversion.\n  - More impatient governments.\n  - Larger oil shares.\n  - A stronger correlation between domestic output and oil price shocks."
    },
    {
      "heading": "Model features and mechanisms",
      "content": "- Stochastic general equilibrium framework.\n- Endogenous sovereign default risk.\n- Economy exposed to co-moving oil price and output processes."
    },
    {
      "heading": "Policy-relevant implications",
      "content": "- Sovereign spreads in oil-exporting emerging markets are sensitive to oil price dynamics and domestic output correlations with oil prices.\n- Countries with larger oil shares, higher government impatience, or higher risk-aversion face stronger procyclical movement in risk premiums associated with oil prices.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2019/11/08/pricing-sovereign-debt-in-resource-rich-economies-48708"
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    "Authors: Thomas McGregor",
    "Published: November 8, 2019",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513516431.001",
    "Research question: How do oil price movements affect sovereign spreads in an oil-dependent economy?",
    "Methodology: Develops a stochastic general equilibrium model of an economy exposed to co-moving oil price and output processes, with endogenous sovereign default risk.",
    "Key claim: The model explains a large proportion of business cycle fluctuations in interest-rate spreads in oil-exporting emerging market economies, particularly the countercyclicallity of interest rate spreads and oil prices.",
    "The model explains a large proportion of business cycle fluctuations in interest-rate spreads in oil-exporting emerging market economies.",
    "The model accounts for the countercyclicallity of interest rate spreads and oil prices.",
    "Factors that strengthen co-movements between risk premiums and the oil price:",
    "Stochastic general equilibrium framework.",
    "Endogenous sovereign default risk.",
    "Economy exposed to co-moving oil price and output processes.",
    "Sovereign spreads in oil-exporting emerging markets are sensitive to oil price dynamics and domestic output correlations with oil prices.",
    "Countries with larger oil shares, higher government impatience, or higher risk-aversion face stronger procyclical movement in risk premiums associated with oil prices.",
    "**Working Paper**"
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