Abstract
Sovereign debt restructurings can be implemented preemptively - prior to a payment default. We code a comprehensive new dataset and find that preemptive restructurings (i) are frequent (38% of all deals 1978-2010), (ii) have lower haircuts, (iii) are quicker to negotiate, and (iv) see lower output losses. To rationalize these stylized facts, we build a quantitative sovereign debt model that incorporates preemptive and post-default renegotiations. The model improves the fit with the data and explains the sovereign’s optimal choice: preemptive restructurings occur when default risk is high ex-ante, while defaults occur after unexpected bad shocks. Empirical evidence supports these predictions.
Dokumententyp: | Paper |
---|---|
Keywords: | Sovereign Debt, Default, Debt Restructuring, Crisis Resolution |
Fakultät: | Volkswirtschaft > Munich Discussion Papers in Economics |
Themengebiete: | 300 Sozialwissenschaften > 330 Wirtschaft |
JEL Classification: | F34, F41, H63 |
URN: | urn:nbn:de:bvb:19-epub-26563-7 |
Sprache: | Englisch |
Dokumenten ID: | 26563 |
Datum der Veröffentlichung auf Open Access LMU: | 14. Dez. 2015, 12:05 |
Letzte Änderungen: | 06. Nov. 2020, 04:26 |
Literaturliste: | [1] Aguiar, Mark and Gita Gopinath (2006). ”Defaultable Debt, Interest Rates and the Current Account.” Journal of International Economics, 69(1), 64-83. [2] Aguiar, Mark and Manuel Amador (2014). ”Sovereign Debt.” In:Handbook of Interna- tional Economics, 4, 647-87. [3] Arellano, Cristina (2008). ”Default Risk and Income Fluctuations in Emerging Economies.” American Economic Review, 98(3), 690-712. [4] Arellano, Cristina and Yan Bai (2014). ”Linkages across Sovereign Debt Markets,” Working Paper, Federal Reserve Bank of Minneapolis. [5] Arellano, Cristina, Xavier Mateos-Planas and Jose V. Rios-Rull (2013). ”Partial Default.” Working paper, Federal Reserve Bank of Minneapolis. [6] Arellano, Cristina and Ananth Ramanarayanan (2012). ”Default and the Maturity Structure in Sovereign Bonds.” Journal of Political Economy, 120(2), 187-232. [7] Asonuma, Tamon (2012). ”Serial Default and Debt Renegotiation.” Working paper, International Monetary Fund. [8] Asonuma, Tamon and Hyungseok Joo (2014). ”Sovereign Debt Restructurings: Delay in Renegotiation and Risk-Averse Creditors.” Working Paper, International Monetary Fund. [9] Asonuma, Tamon, Gerardo Peraza, Kristine Vitola, and Takahiro Tsuda (2014). ”Sovereign Debt Restructurings in Belize: Achievements and Challenges Ahead.” IMF Working Paper 14/132. [10] Bai, Yan and Jing Zhang (2010). ”Duration of Sovereign Debt Renegotiation.” Journal of International Economics, 86(2), 252-268. [11] Benjamin, David and Mark L.J. Wright (2009). ”Recovery Before Redemption? A Theory of Delays in Sovereign Debt Renegotiations.” Working Paper, University of California, Los Angeles. [12] Bi, Ran (2008). ””Beneficial” Delays in Debt Restructuring Negotiations.” IMF Working Paper 08/38. [13] Bolton, Patrick and Olivier Jeanne (2007). ”Structuring and Restructuring Sovereign Debt: The Role of a Bankruptcy Regime.” Journal of Political Economy, 115(6), 901-924. [14] Bolton, Patrick and Olivier Jeanne (2009). ”Structuring and Restructuring Sovereign Debt: The Role of Seniority.” Review of Economic Studies, 76(3), 879-902. [15] Borensztein Eduardo and Ugo Panizza (2009). ”The Costs of Sovereign Default.” IMF Staff Papers, 56(4), 683-741. [16] Brookings-Committee on International Economic Policy and Reform (CEIPR) (2013). ”Revisiting Sovereign Bankruptcy.” Brookings Institution, October. [17] Bulow, Jeremy and Kenneth S. Rogoff (1989). ”Sovereign Debt: Is to Forgive or to Forget?” American Economic Review, 79, 43-50. [18] Calvo, Guillermo A. (1988). ”Servicing the Public Debt: The Role of Expectations.” American Economic Review, 78(4), 647-661. [19] Chatterjee, Satyajit and Burcu Eyigungor (2012). ”Maturity, Indebtedness, and Default Risk.” American Economic Review, 102(6), 2674-2699. [20] Corsetti, Giancarlo and Luca Dedola (2013). ”The Mystery of the Printing Press: Self- fulfilling Debt Crises and Monetary Sovereignty.” CEPR Discussion Paper No.9358. [21] Cruces, Juan and Christoph Trebesch (2013). ”Sovereign Defaults: The Price of Haircuts.” American Economic Journal: Macroeconomics, 5(3), 85-117. [22] Das, Udaibir S., Michael G. Papaioannou and Christoph Trebesch (2012) ”Sovereign Debt Restructurings 1950-2010: Literature Survey, Data, and Stylized Facts.” IMF Working Paper 12/203. [23] De Paoli, Bianca, Glenn Hoggarth and Victoria Saporta (2009). ”Output Costs of Sovereign Crises: Some Empirical Estimates.” Bank of England Working Paper No.362. [24] D’Erasmo, Pablo (2010). ”Government Reputation and Debt Repeymant in Emerging Economies.” Working Paper, University of Maryland. [25] Diaz-Cassou, Javier, Aitor Erce and Juan Vazquez-Zamora (2008). ”Recent Episodes of Sovereign Debt Restructurings. A Case-study Approach.” Banco de Espana Occasional Paper No.0804. [26] Duggar, Elena (2013). ”The Role of Holdout Creditors and CACs in Sovereign Debt Restructurings.” Moody’s Sovereign Default Series Compendium, October 7, 2013. [27] Eaton, Jonathan, and Mark Gersovitz (1981). ”Debt with Potential Repudiation: Theoretical and Empirical Analysis.” Review of Economic Studies, 48, 289-309. [28] Enderlein, Henrik, Christoph Trebesch and Laura von Daniels (2012). ”Sovereign Debt Disputes: A Database on Government Coerciveness During Debt Crises.” Journal of International Money and Finance, 31(2), 250-266. [29] Erce, Aitor (2013). ”Sovereign Debt Restructurings and the IMF: Implications for Future Official Interventions.” Federal Reserve Bank of Dallas Working Paper 143. [30] Fernandez, Raquel and Alberto Martin (2014). ”The Long and the Short of It: Sovereign Debt Crises and Debt Maturity.” NBER Working Paper No.20786. [31] Finger, Harald and Mauro Mecagni (2007). ”Sovereign Debt Restructuring and Debt Sustainability - An Analysis of Recent Cross-Country Experience.” IMF Occasional Paper No. 255. [32] Friedman, Irving S. (1983). The World Debt Dilemma: Managing Country Risk, Washington, D.C.: Council for International Banking Studies. [33] Gelos, Gaston, Ratna Sahay and Guido Sandleris (2011). ”Sovereign Borrowing by Developing Countries: What Determines Market Access?” Journal of International Economics, 83(2), 243-254. [34] Hatchondo, Juan C. and Leonardo Martinez (2009). ”Long-Duration Bonds and Sovereign Defaults.” Journal of International Economics, 79(1), 117-125. [35] Hatchondo, Juan C., Leonardo Martinez and Cesar Sosa Padilla (2014). ”Voluntary Sovereign Debt Exchanges.” Journal of Monetary Economics, 61, 32-50. [36] International Monetary Fund (2013). ”Sovereign Debt Restructuring: Recent Devel- opments and Implications for the Fund’s Legal and Policy Framework.” IMF Board Paper, March. [37] Kovrijnykh, Natalia and Balazs Szentes (2007). ”Equilibrium Default Cycles.” Journal of Political Economy, Vol. 115(3), 403-446. [38] Laeven, Luc and Fabian Valencia (2012). ”Systemic Banking Crises Database: An Update.” IMF Working Paper 12/163. [39] Levy-Yeyati, Eduardo and Ugo Panizza (2011). ”The Elusive Costs of Sovereign Defaults.” Journal of Development Economics, 94(1), 95-105. [40] Manasse, Paolo and Nouriel Roubini (2009). ”’Rules of Thumb’ for Sovereign Debt Crises.” Journal of International Economics, 78(2), 192-205. [41] Mendoza, Enrique G. and Vivian Z. Yue (2012). ”A General Equilibrium Model of Sovereign Default and Business Cycles.” The Quarterly Journal of Economics, 127(2), 889-946. [42] Panizza, Ugo, Federico Sturzenegger and Jeromin Zettelmeyer (2009). ”The Economics and Law of Sovereign Debt and Default.” Journal of Economic Literature, 47(3), 651- 698. [43] Pitchford, Rohan and Mark L.J. Wright (2012). ”Holdouts in Sovereign Debt Restruc- turings: A Theory of Negotiations in a Weak Contractual Environment.” Review of Economic Studies, 79(2), 812-837. [44] Reinhart, Carmen M. and Kenneth S. Rogoff (2009). This Time is Different. Eight Centuries of Financial Folly. Princeton University Press, Princeton. [45] Rieffel, Lex (2003). Restructuring Sovereign Debt: The Case for Ad Hoc Machinery. Washington, D.C.: Brookings Institution Press. [46] Roubini, Nouriel and Brad Setser (2004). Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies. Institute for International Economics, Washington, D.C. [47] Sachs, Jeffrey and Harry Huizinga (1987). ”U.S. Commercial Banks and the Developing- Country Debt Crisis.” Brookings Papers on Economic Activity, 18(2), 555-606. [48] Schumacher, Julian, Christoph Trebesch and Henrik Enderlein (2014). ”Sovereign Defaults in Court.” Working Paper, University of Munich. [49] Stamm, Hanspeter (1987). Kooperation und Konflikt im Weltfinanzsystem. Eine Analyse multilateraler Umschuldungsaktionen seit 1956., Soziologisches Institut der Universitat Zurich. [50] Standard and Poor’s (2006). ”Default Study: Sovereign Defaults At 26-Year Low, To Show Little Change In 2007.” September 18, 2006. [51] Sturzenegger, Federico (2004). ”Tools for the Analysis of Debt Problems.” Journal of Restructuring Finance, 1, 201-223. [52] Sturzenegger, Federico and Jeromin Zettelmeyer (2006). Debt Defaults and Lessons from a Decade of Crises. MIT Press. [53] Sturzenegger, Federico and Jeromin Zettelmeyer (2008). ”Haircuts: Estimating Investor Losses in Sovereign Debt Restructurings, 1998-2005.” Journal of International Money and Finance, 27(5), 780-805. [54] Tauchen, George (1986). ”Finite State Markov-chain Approximations to Univariate and Vector Autoregressions.” Economic Letters, 20(2), 177-181. [55] Tomz, Michael and Mark L.J. Wright (2007) ”Do Countries Default in ”Bad” Times?” Journal of European Economic Association, 5(2-3), 352-360. [56] Trebesch, Christoph (2011). ”Debt Restructuring Delays: Measurement and Stylized Facts.” In: Kolb, R. (Ed.): Sovereign Debt: From Safety to Default. Hoboken: Wiley, 169-177. [57] Trebesch, Christoph (2013). ”Delays in Sovereign Debt Restructurings.” Working Paper, University of Munich. [58] Trebesch, Christoph and Michael Zabel (2014). ”The Output Costs of Hard and Soft Sovereign Default.” Working Paper, University of Munich. [59] Yue, Vivian Z. (2010). ”Sovereign Default and Debt Renegotiation.” Journal of International Economics, 80(2), 176-187. |