; ; ; "ActiveFedora::Aggregation::ListSource" . a , ; "Default Risk, Sectoral Reallocation and Persistent Recessions"; ; "batchuser@example.com"; "Arellano, Cristina", "Mihalache, Gabriel", "Bai, Yan"; "Federal Reserve Bank of Minneapolis"; "Capital accumulation", "Real exchange rate", "European debt crisis", "Sovereign default with production economy", "Traded and nontraded production"; "E30 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)", "F30 - International Finance: General"; "Sovereign debt crises are associated with large and persistent declines in economic activity, disproportionately so for nontradable sectors. This paper documents this pattern using Spanish data and builds a two-sector dynamic quantitative model of sovereign default with capital accumulation. Recessions are very persistent in the model and more pronounced for nontraded sectors because of default risk. An adverse domestic shock increases the likelihood of default, limits capital inflows, and thus restricts the ability of the economy to exploit investment opportunities. The economy responds by reducing investment and reallocating capital toward the traded sector to support debt service payments. The real exchange rate depreciates, a reflection of the scarcity of traded goods. We find that these mechanisms are quantitatively important for rationalizing the experience of Spain during the recent debt crisis."^^; "2017-09-11"; "2019-05-17T13:38:32.089264582+00:00"^^; "https://doi.org/10.21034/sr.555"; ; "https://creativecommons.org/licenses/by-nc/4.0/"; "Thu Nov 7 20:54:31 2019"; "https://creativecommons.org/licenses/by-nc/4.0/"; "Research Paper"; "523", "33", "49"; "Staff report (Federal Reserve Bank of Minneapolis. Research Department)"; "555"; "Real exchange rate", "European debt crisis", "Sovereign default with production economy", "Capital accumulation", "Traded and nontraded production"; ; ; ; ; "Federal Reserve Bank of Minneapolis. Research Department"; "Published in: _Journal of International Economics_ (Vol. 112, May 2018, pp. 182-199) https://doi.org/10.1016/j.jinteco.2018.01.004."^^; ; "Publication" . ; .