Cesar Sosa Padilla's Books

Fiscal Rules

Coping with Revenue Volatility in Lesotho and Swaziland

By: Mr.Jiro Honda,Manabu Nose,Cesar Sosa Padilla,Mr.Jose L. Torres,Ms.Murna Morgan,Mr.Fernando G Im,Ms.Natalia A Koliadina

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Fiscal Rules

Coping with Revenue Volatility in Lesotho and Swaziland

By: Mr.Jiro Honda,Manabu Nose,Cesar Sosa Padilla,Mr.Jose L. Torres,Ms.Murna Morgan,Mr.Fernando G Im,Ms.Natalia A Koliadina

Over the past decade, Lesotho and Swaziland have faced significant volatility in their fiscal revenues, owing to highly unstable Southern African Customs Union (SACU) receipts. Based on model analysis, this paper explores the advantages of implementing fiscal rules to deal with such volatility. It finds that the use of a structural balance target could smooth the growth impact from revenue shocks while helping preserve sufficient international reserves during bad times. From a long-term perspective, it suggests possible welfare gains from introducing fiscal rules. Last, it concludes that, based on experiences in other countries, developing strong institutions and improving public financial management are necessary steps to ease the transitions to a rules-based fiscal policy framework.

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International Monetary Fund

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ISBN 10

148430957X

ISBN 13

9781484309575

Debt Dilution and Sovereign Default Risk

By: Mr.Leonardo Martinez,Juan Carlos Hatchondo,Cesar Sosa Padilla

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Debt Dilution and Sovereign Default Risk

By: Mr.Leonardo Martinez,Juan Carlos Hatchondo,Cesar Sosa Padilla

We propose a modification to a baseline sovereign default framework that allows us to quantify the importance of debt dilution in accounting for the level and volatility of the interest rate spread paid by sovereigns. We measure the effects of debt dilution by comparing the simulations of the baseline model (with debt dilution) with the ones of the modified model without dilution. We calibrate the baseline model to mimic the mean and standard deviation of the spread, as well as the external debt level, the mean debt duration and a measure of default frequency in the data. We find that, even without commitment to future repayment policies and withoutcontingency of sovereign debt, if the sovereign could eliminate debt dilution, the number of default per 100 years decreases from 3.10 to 0.42. The mean spread decreases from 7.38% to 0.57%. The standard deviation of the spread decreases from 2.45 to 0.72. Default risk falls in part because of a reduction of the level of sovereign debt (36% of the face value and of 11% of the market value). But we show that the most important effect of dilution on default risk results from a shift in the set of government's borrowing opportunities. Our analysis is also relevant for the study of other credit markets where the debt dilution problem could be present.

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International Monetary Fund

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ISBN 10

1455227099

ISBN 13

9781455227099

Sovereign Debt Standstills

By: Juan Carlos Hatchondo,Mr.Leonardo Martinez,Cesar Sosa Padilla

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Sovereign Debt Standstills

By: Juan Carlos Hatchondo,Mr.Leonardo Martinez,Cesar Sosa Padilla

As a response to economic crises triggered by COVID-19, sovereign debt standstill proposals emphasize debt payment suspensions without haircuts on the face value of debt obligations. We quantify the effects of standstills using a standard default model. We find that a one-year standstill generates welfare gains for the sovereign equivalent to a permanent consumption increase of between 0.1% and 0.3%, depending on the initial shock. However, except when it avoids a default, the standstill also implies capital losses for creditors of between 9% and 27%, which is consistent with their reluctance to participate in these operations and indicates that this reluctance would persist even without a free-riding or holdout problem. Standstills also generate a form of “debt overhang” and thus the opportunity for a “voluntary debt exchange”: complementing the standstill with haircuts could reduce creditors’ losses and simultaneously increase welfare gains. Our results cast doubts on the emphasis on standstills without haircuts.

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INTERNATIONAL MONETARY FUND

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1513564536

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9781513564531

Book's by Cesar Sosa Padilla

Fiscal Rules

Fiscal Rules

Debt Dilution and Sovereign Default Risk

Debt Dilution and Sovereign Default Risk

Sovereign Debt Standstills

Sovereign Debt Standstills

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