Date of Award

Spring 5-15-2023

Author's School

Graduate School of Arts and Sciences

Author's Department


Degree Name

Doctor of Philosophy (PhD)

Degree Type



The recent phenomenon of debt redemption is posing new challenges in emerging economies, whichare typically characterized by high levels of sovereign default risk. How do sovereign default risk and sovereign debt affect central bank independence? And how does this affect reserve accumulation in these countries? In the first chapter of this dissertation I study how business cycle fluctuations affect sovereign debt and sovereign default risk and how the de facto central bank independence is endogenously determines in emerging economies. I build a sovereign default model in which, period-by- period, the fiscal authority determines the degree of independence of the monetary authority in order to obtain the desired level of inflation. In the model, lower GDP triggers higher sovereign debt and default risk, causing a deterioration of the de facto central bank independence and higher inflation. I show that institutional arrangements aiming at leaving the central bank independent are welfare improving. In the second chapter I analyze how higher central bank independence affects the reserve accumulation in emerging economies and explain the disinflation process observed in the last 20 years. I develop a dual authority sovereign default in which the fiscal authority issues defaultable debt and the monetary authority accumulates reserves and determines the inflation rate of the period. In the model I show how higher central bank independence improves the reserves accumulation for consumption smoothing purposes. In addition, and conditional on the calibration of the model, the higher reserve accumulation can explain the decline in the observed inflation rate, due to a decline in its marginal benefit through lower marginal utility of consumption.


English (en)

Chair and Committee

Francisco J. Buera

Committee Members

Yongseok Shin, Paulina Restrepo-Echavarria, Ping Wang, Costas Azariadis,