1.

Record Nr.

UNINA9910826876803321

Autore

Messmacher Miguel

Titolo

Sovereign insurance and program design : what is optimal for the sovereign? / / prepared by Miguel Messmacher

Pubbl/distr/stampa

[Washington, D.C.], : International Monetary Fund, IMF Institute, 2006

ISBN

1-4623-1248-9

1-4527-8647-X

1-283-51558-X

1-4519-0860-1

9786613828033

Edizione

[1st ed.]

Descrizione fisica

1 online resource (30 p.)

Collana

IMF working paper ; ; WP/06/64

Soggetti

Insurance - Econometric models

Moral hazard - Econometric models

International finance - Econometric models

Lingua di pubblicazione

Inglese

Formato

Materiale a stampa

Livello bibliografico

Monografia

Note generali

"March 2006."

Nota di bibliografia

Includes bibliographical references.

Nota di contenuto

""Contents""; ""I. INTRODUCTION""; ""II. MORAL HAZARD AND SOVEREIGN INSURANCE""; ""III. BASIC MODEL STRUCTURE AND THE ROLE OF INSURANCE""; ""IV. AN ALTRUISTIC INSURER""; ""V. DEFAULT BY THE COUNTRY""; ""VI. CONCLUSIONS""; ""VII. DERIVATION OF THE RESULTS""; ""REFERENCES""

Sommario/riassunto

The design of the optimal sovereign insurance contract is analyzed when: the sovereign chooses the contract; effort is not contractible; shocks are of uncertain magnitude; the sovereign can save; and the sovereign can default. Under these conditions: i) an ex ante premium leads to higher coverage; ii) the premium increases with the sovereign's incentive to take risks; iii) a deductible is chosen to limit moral hazard; iv) the deductible-to-support ratio is decreasing with the size of the realized shock; and v) the change in the choice of savings when insurance is available is ambiguous, as there is a trade-off between inducing higher effort and increasing the likelihood of default.