01752cas a2200241 a 4500 AALejournalIMF008982 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451863246 1018-5941 BD-DhAAL BD-DhAAL Messmacher, Miguel. Sovereign Insurance and Program Design : What is Optimal for the Sovereign? / Miguel Messmacher. Washington, D.C. : International Monetary Fund, 2006. 1 online resource (30 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The design of the optimal sovereign insurance contract is analyzed when: the sovereign chooses the contract; effort is not contractible; shocks are of uncertain magnitude; the sovereign can save; and the sovereign can default. Under these conditions: i) an ex ante premium leads to higher coverage; ii) the premium increases with the sovereign's incentive to take risks; iii) a deductible is chosen to limit moral hazard; iv) the deductible-to-support ratio is decreasing with the size of the realized shock; and v) the change in the choice of savings when insurance is available is ambiguous, as there is a trade-off between inducing higher effort and increasing the likelihood of default. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2006/064 Full text available on IMF http://elibrary.imf.org/view/journals/001/2006/064/001.2006.issue-064-en.xml IMF e-Library