Essays on sovereign debt and international capital flows

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2009.Includes bibliographical references.This dissertation is a collection of three essays on public and private borrowing on international capital markets, with a focus on optimal policy for the government and international financial institutions. Chapter 1 focuses on sovereign debt and default. Recent sovereign default episodes have been associated with substantial output costs, and the sovereign should take into account that any default decision may exacerbate such costs. I construct a two-period model where sovereign debt is held by both foreign creditors and domestic residents. Default on foreign lenders benefits domestic consumption, but default on domestic residents generates an output cost that increases with the extent of the default. I present two sets of optimal policy results. Firstly, I characterize the optimal default decision and show that full repudiation of debt is not optimal when domestic output costs are sufficiently high. A corollary is that the sovereign can issue debt even in the absence of reputational mechanisms. Secondly, I show that it is optimal for the government to render the domestic economy vulnerable to the adverse effects of default, in order to raise funds cheaply from abroad. Economic fragility is an optimal response to the lack of commitment of the sovereign. Chapter 2 extends the results to an infinite horizon specification. If the default decision does not lead to reduced capital market access in the future, the results from the two-period model remain valid in the infinite horizon.(cont.) I expand the framework to incorporate persistent productivity shocks. For this case, an adverse productivity shock leads to a reduction in the feasible set of debt levels today. I show that optimal borrowing may now be increasing, rather than decreasing, in the productivity shock. Finally, I examine whether the government chooses to issue debt in the long run. If the government is allowed to save abroad and simultaneously issue government debt, then it is optimal for the government to have a positive gross debt position even in the long run, irrespective of the discount factor. The results of chapter 1 are therefore operative in the infinite horizon. Chapter 3 concentrates on private rather than public borrowing. This chapter characterizes optimal IMF policy in an environment with moral hazard followed by adverse selection. In my framework, government actions to improve domestic productivity are not always effective, and the government learns of the success of its actions before foreign investors. Without the IMF, it is not possible for foreign investors to discern the quality of the domestic production sector. There only exists a pooling equilibrium ex post, which leads to low government effort ex ante. Optimal IMF intervention is the solution to a mechanism design problem in the presence of imperfectly informed competitive markets. Optimal IMF policy is structured so as to reveal the government's private information to foreign investors in a separating equilibrium. Government effort ex ante is high.(cont.) Countries with weak fundamentals ex post accept IMF transfers and face high interest rates on private capital markets. Countries with strong fundamentals make contributions to the IMF and receive low interest rates from foreign investors.by Suman S. Basu.Ph.D

Understanding the degeneracies in NOν\nuA data

The combined analysis of $\nu_\mu$ disappearance and $\nu_e$ appearance data of NO$\nu$A experiment leads to three nearly degenerate solutions. This degeneracy can be understood in terms of deviations in $\nu_e$ appearance signal, caused by unknown effects, with respect to the signal expected for a reference set of oscillations parameters. We define the reference set to be vacuum oscillations in the limit of maximal $\theta_{23}$ and no CP-violation. We then calculate the deviations induced in the $\nu_e$ appearance signal event rate by three unknown effects: (a) matter effects, due to normal or inverted hierarchy (b) octant effects, due to $\theta_{23}$ being in higher or lower octant and (c) CP-violation, whether $\delta_{CP} \sim - \pi/2$ or $\delta_{CP} \sim \pi/2$. We find that the deviation caused by each of these effects is the same for NO$\nu$A. The observed number of $\nu_e$ events in NO$\nu$A is equivalent to the increase caused by one of the effects. Therefore, the observed number of $\nu_e$ appearance events of NO$\nu$A is the net result of the increase caused by two of the unknown effects and the decrease caused by the third. Thus we get the three degenerate solutions. We also find that further data by NO$\nu$A can not distinguish between these degenerate solutions but addition of one year of neutrino run of DUNE can make a distinction between all three solutions. The distinction between the two NH solutions and the IH solution becomes possible because of the larger matter effect in DUNE. The distinction between the two NH solutions with different octants is a result of the synergy between the anti-neutrino data of NO$\nu$A and the neutrino data of DUNE.Comment: Published version v2; with minor changes to v

Regional reserve pooling arrangements

Recently, several emerging market countries in East Asia and Latin America have initiated intra-regional reserve pooling mechanisms. This is puzzling from a traditional risk-diversification perspective, because country-level shocks are more correlated within rather than across regions. This paper provides a novel rationale for intra-regional pooling: if non-contingent reserve assets can be used to support production during a crisis, then a country's reserve accumulation decision affects not only its own production and consumption, but also its trading partners. If consumption through terms of trade effects. These terms of trade adjustments can be fully internalized only by a reserve pool among trading partners. If trade linkages are stronger within rather than across regions, then intra-regional reserve pooling may dominate inter-regional pooling, even if shocks are more correlated within regions.

Advanced ablation strategies for management of post-surgical atrial arrhythmias.

Post-surgical arrhythmias include a wide range of arrhythmias occurring late after cardiac surgery and represent a complex substrate for catheter ablation either because of extended scar and remodeling or because of limited access to the area of interest. Novel image integration and ablation tools have made the catheter ablation in this population both feasible and successful. We review a structured approach to catheter ablation of post-surgical atrial arrhythmias in various patient cohorts including the most common congenital heart defects