International Finance and Macroeconomics.

• Position: Program and Working Group Meetings

The NBER's Program on International Finance and Macroeconomics met in Cambridge on November 7. Organizers Charles Engel, NBER and University of Wisconsin, and Linda Tesar, NBER and University of Michigan, chose the following papers to discuss:

Cristina Areilano, University of Minnesota, and Ananth Ramanarayanan, Federal Reserve Bank of Dallas, "Default and Maturity Structure in Foreign Bonds"

Discussant: Olivier Jeanne, John Hopkins University

Anton Korinek, University of Maryland, "Regulating Capital Flows to Emerging Markets: An Externality View"

Discussant: Gita Gopinath, Harvard University and NBER

Lukasz A. Drozd, University of Wisconsin, and Jaromir B. Nosal, Columbia University, "Understanding International Prices: Customers as Capital"

Discussant: Paolo Pesenti, Federal Reserve Bank of New York and NBER

Ariel Burstein, University of California, Los Angeles and NBER, and Nir Jaimovich, Stanford University and NBER, "Understanding Movements in Aggregate and Product-Level Real Exchange Rates"

Discussant: David Weinstein, Columbia University and NBER

Hanno Lustig, University of California, Los Angeles and NBER; Nick Roussanov, University of Pennsylvania; and Adrien Verdelhan, Boston University, "Common Risk Factors in Currency Markets"

Discussant: Craig Burnside, Duke University and NBER

Yan Bai, Arizona State University, and Jing Zhang, University of Michigan, "Financial Integration and International Risk Sharing"

Discussant: Vivian Yue, New York University

Arellano and Ramanarayanan study the maturity composition and the term structure of interest rate spreads on government debt in emerging markets. When interest rate spreads rise, debt maturity shortens and the spread on short-term bonds is higher than on long-term bonds. To account for this pattern, the authors build a dynamic model of international borrowing, with endogenous default and multiple maturities of debt. Short-term debt can deliver higher immediate consumption than long-term debt; large long-term loans are not available because the borrower cannot commit to save in the near future towards repayment in the distant future. However, issuing long-term debt can insure against the need to rollover short-term debt at high interest rate spreads. The trade-off between these two benefits is quantitatively important for understanding the maturity composition in emerging markets. When calibrated to data from Brazil, the model matches the dynamics in the maturity of debt issuances...