Checking date: 09/07/2020

Course: 2020/2021

Topics in macroeconomics (A)
Study: Master in Economic Analysis (68)

Coordinating teacher: YURDAGUL , EMIRCAN

Department assigned to the subject: Department of Economics

Type: Electives
ECTS Credits: 4.0 ECTS


Students are expected to have completed
Macroeconomics I, Macroeconomics II and Macroeconomics III
Competences and skills that will be acquired and learning results.
The objective of the course is to study the contemporaneous models of sovereign default, and the ways they can help us reconcile the empirical regularities of emerging markets' borrowing.
Description of contents: programme
1. Big picture, motivating facts on Sovereign Default. 2. Building blocks of sovereign default literature. 3. Recap of numerical tools. - Approximating AR(1) processes. - Smart discrete search. - Solving the basic setup. 4. Sovereign bonds with long maturity bonds. - Exogenous maturity - Endogenous maturity 5. Distressed debt restructurings. - Empirical facts - Modeling endogenous restructuring 6. News about the future - News with short bonds. - News and endogenous maturity 7. Enriching the lenders' side - Risk averse international lenders: - Extension with heterogeneity among lenders - Sovereign defaults and reserves - Domestic lending through a banking sector 8. Endogenous sudden stops - Classic papers on self-fulfilling crises. - Quantitative analysis with additional features
Learning activities and methodology
Learning activities Lectures Group and individual assignments Reading assignments and class discussions Office hours Methodology Lectures in which the professor teaches basic concepts, distributes assignments, and presents the readings necessary to complement the class activities. Critical readings of the material presented by the professor. One assignment of writing a referee report on a seminal or contemporary paper. One numerical assignment of solving one of the papers taught in the course by modifying a few assumptions.
Assessment System
  • % end-of-term-examination 60
  • % of continuous assessment (assigments, laboratory, practicals...) 40
Basic Bibliography
  • Aguiar, M., M. Amador, H. Hopenhayn, and I. Werning. Take the Short Route: Equilibrium Default and Debt Maturity. -. 2019
  • Aguiar, M., S. Chatterjee, H. Cole, and Z. Stangebye . Quantitative Models of Sovereign Debt Crises. in Handbook of Macroeconomics, ed. by J. B. Taylor, and H. Uhlig, vol. 2 of Handbook of Macroeconomics, chap. 0, pp. 1697-1755. 2016
  • Aguiar, M., and G. Gopinath. Defaultable debt, interest rates and the current account. Journal of International Economics, 69, 64-83.. 2006
  • Arellano, C.. Default Risk and Income Fluctuations in Emerging Economies. American Economic Review, 98(3), 690-712. 2008
  • Bianchi, J., J. C. Hatchondo, and L. Martinez . International Reserves and Rollover Risk. American Economic Review, 108(9), 2629-2670.. 2018
  • Bocola, L., and A. Dovis . Self-Fulfilling Debt Crises: A Quantitative Analysis. NBER Working Papers 22694, National Bureau of Economic Research, Inc.. 2016
  • Chatterjee, S., and B. Eyigungor . Maturity, Indebtedness, and Default Risk. American Economic Review, 102(6), 2674-99. 2012
  • Cole, H. L., and T. J. Kehoe . Self-Fulfilling Debt Crises. Review of Economic Studies, 67(1), 91-116.. 2000
  • Cruces, J. J., and C. Trebesch . Sovereign Defaults: The Price of Haircuts. American Economic Journal: Macroeconomics, 5(3), 85-117. 2013
  • Durdu, C. B., R. Nunes, and H. Sapriza . News and sovereign default risk in small open economies. Journal of International Economics, 91(1), 1-17.. 2013
  • Dvorkin, M., J. M. Sanchez, H. Sapriza, and E. Yurdagul . News, sovereign debt maturity, and default risk. Working Papers 2018-33, Federal Reserve Bank of St. Louis. 2018
  • Dvorkin, M., J. M. Sanchez, H. Sapriza, and E. Yurdagul . Sovereign Debt Restructurings. Working Papers 2018-13, Federal Reserve Bank of St. Louis.. 2018
  • Eaton, J., and M. Gersovitz. Debt with potential repudiation: theoretical and empirical analysis. Review of Economic Studies, 48, 289-309. 1981
  • Gordon, G., and S. Qiu . A Divide and Conquer Algorithm for Exploiting Policy Function Monotonicity. Caepr Working Papers 2015-002, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington. 2015
  • Hatchondo, J. C., and L. Martinez. Long-duration bonds and sovereign defaults. Journal of International Economics, 79(1), 117-125.. 2009
  • Sanchez, J. M., H. Sapriza, and E. Yurdagul . Sovereign default and maturity choice. Journal of Monetary Economics, 95(C), 72-85. 2018
Detailed subject contents or complementary information about assessment system of B.T.

The course syllabus and the academic weekly planning may change due academic events or other reasons.