Fear of Sovereign Default, Banks, and Expectations-Driven Business Cycles
Why this work is in the frame
A frame that forgets how it found something cannot be audited. These are the routes that admitted this work.
Bibliographic record
Abstract
What is the effect of the fear of future sovereign default on the economy of \nthe defaulting country? The typical sovereign default model does not address \nthis question. In this paper we wish to explore the possibility that changing \nexpectations about future default themselves can lead to financial stress (as \nmeasured by credit spreads) and recessionary outcomes. We exploit the "news- \nshock" framework to consider an environment in which sovereign debt-holders \nreceive imperfect signals about the portion of debt that a sovereign may default \non in the future. We then investigate how domestic banks can play a role in \ntransmitting the expectation of default into a realized recession through the \ninteraction of the domestic banks' holdings of government debt and their risk- \nweighted capital requirements. Our results suggest that, consistent with the \ndata, even in the absence of actual realized government default, an increase in \npessimism regarding the prospect of future default results in a rise in yields on \ngovernment debt and an increase in interest rates on private domestic loans, as \nwell as a recession in the economy.
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Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.000 | 0.000 |
| Meta-epidemiology (narrow) | 0.001 | 0.001 |
| Meta-epidemiology (broad) | 0.001 | 0.000 |
| Bibliometrics | 0.001 | 0.001 |
| Science and technology studies | 0.001 | 0.001 |
| Scholarly communication | 0.000 | 0.002 |
| Open science | 0.001 | 0.002 |
| Research integrity | 0.001 | 0.001 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from it