?url_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Adc&rft.relation=https%3A%2F%2Fmpra.ub.uni-muenchen.de%2F28236%2F&rft.title=Asymmetric+Shocks%2C+Long-term+Bonds+and+Sovereign+Default&rft.creator=Zhu%2C+Junjun&rft.creator=Xie%2C+Shiyu&rft.subject=F34+-+International+Lending+and+Debt+Problems&rft.subject=E44+-+Financial+Markets+and+the+Macroeconomy&rft.description=We+present+a+sovereign+default+model+with+asymmetric+shocks+and+long-term+bonds%2C+and+solve+the+model+using+discrete+state+dynamic+programming.+As+result%2C+our+model+matches+the+Argentinean+economy+over+period+1993Q1-2001Q4+quite+well.+We+show+that+our+model+can+match+high+default+frequency%2C+high+debt%2Foutput+ratio+and+other+cyclical+features%2C+such+as+countercyclical+interest+rate+and+trade+balance+in+emerging+countries.+Moreover%2C+with+asymmetric+shocks+we+are+able+to+match+high+sovereign+spread+level+and+low+spread+volatility+simultaneously+in+one+model%2C+which+is+till+now+not+well+solved.+As+another+contribution+of+our+paper%2C+we+propose+a+simulation-based+approach+to+approximate+transition+function+of+output+shocks+between+finite+states%2C+which+is+an+indispensable+step+in+discrete+state+dynamic+programming.+Comparing+to+Tauchen%E2%80%99s+method%2C+our+approach+is+very+flexible+in+transforming+various+econometric+models+to+finite+state+transition+function%2C+so+that+our+approach+can+be+widely+used+in+simulating+different+kinds+of+discrete+state+shocks.&rft.date=2011-01-18&rft.type=MPRA+Paper&rft.type=NonPeerReviewed&rft.format=application%2Fpdf&rft.language=en&rft.identifier=https%3A%2F%2Fmpra.ub.uni-muenchen.de%2F28236%2F1%2FMPRA_paper_28236.pdf&rft.identifier=++Zhu%2C+Junjun+and+Xie%2C+Shiyu++(2011)%3A+Asymmetric+Shocks%2C+Long-term+Bonds+and+Sovereign+Default.++++&rft.language=en