Overview
Description
His research demonstrates that, due to the risk of default, creditors require emerging markets governments to pay a large credit spread even when they borrow in their own currency. Further, Professor Schreger’s findings indicate that governments may choose to default because they may view it as less painful than a large depreciation if local corporations continue to borrow from abroad in foreign currency.
Beyond the matter of local currency sovereign debt, Professor Schreger has analyzed the case of NML Capital v. Republic of Argentina to identify the causal effect of sovereign default. Using the timing of legal rulings, he found that an increase in the probability of default causes a significant decline in the Argentine equity market and a depreciation of the exchange rate.