Tsinghua PBCSF Seminar (May 9, 2025): Vivian Zhanwei Yue, Professor, Emory University: A Theory of International Official Lending

Time: 2025-05-06 17:02 Print

Topic: A Theory of International Official Lending

Speaker: Vivian Zhanwei Yue, Professor, Emory University

Time: 10:00am-11:30am, Friday, May 9

Location: 1-100

Abstract:

We examine international official lending using a repeated game model of sovereign debt in the presence of two frictions: limited enforcement and moral hazard. First, the sovereign country can renege on their debt obligation. Second, lenders cannot perfectly observe whether the sovereign uses the borrowed funds for consumption or export production. The constrained optimal allocation (COA) prescribes imperfect insurance and employs dynamic incentives in designing optimal contract. We show that the COA can be implemented as a competitive equilibrium featuring official lending and private lending. Quantitative analysis demonstrates that official debt is countercyclical, while private debt is procyclical, consistent with empirical evidence. Our finding accounts for the endogenous composition of creditors and highlights the role of international official lending in sovereign debt markets.


Speaker Biography:

Vivian Zhanwei Yue is a Samuel Candler Dobbs Professor of Economics in the Department of Economics, Emory University. She is also Research Associate at the NBER, Research Fellow at CEPR, and a senior research fellow at the Federal Reserve Bank of Atlanta. Before joining Emory University, Professor Yue worked as an assistant professor at New York University and an economist at the Federal Reserve Board of Governors. Her research areas are on international finance, macroeconomics, and international trade. She has published in leading academic journals such as American Economic Review, Quarterly Journal of Economics, Journal of Finance, Journal of International Economics, Journal of Monetary Economics, and Journal of Econometrics. She has served as Co-Editor for Journal of International Economics, associate editor for Journal of Monetary Economics, International Economic Review, IMF Economic Review, and on the Board of Editors for American Economic Journal- Macroeconomics.