Advanced Search
MyIDEAS: Login

The Economics and Law of Sovereign Debt and Default

Contents:

Author Info

  • Ugo Panizza
  • Federico Sturzenegger
  • Jeromin Zettelmeyer

Abstract

This paper surveys the recent literature on sovereign debt and relates it to the evolution of the legal principles underlying the sovereign debt market and the experience of the most recent debt crises and defaults. It finds limited support for theories that explain the feasibility of sovereign debt based on either external sanctions or exclusion from the international capital market and more support for explanations that emphasize domestic costs of default. The paper concludes that there remains a case for establishing institutions that reduce the cost of default but the design of such institutions is not a trivial task.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jel.47.3.651
Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 47 (2009)
Issue (Month): 3 (September)
Pages: 651-98

as in new window
Handle: RePEc:aea:jeclit:v:47:y:2009:i:3:p:651-98

Note: DOI: 10.1257/jel.47.3.651
Contact details of provider:
Email:
Web page: http://www.aeaweb.org/journal
More information through EDIRC

Order Information:
Web: http://www.aeaweb.org/subscribe.html

Related research

Keywords:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Ugo Panizza & Dany Jaimovich, 2007. "Procyclicality or Reverse Causality?," Research Department Publications 4508, Inter-American Development Bank, Research Department.
  2. Yue, Vivian Z., 2010. "Sovereign default and debt renegotiation," Journal of International Economics, Elsevier, vol. 80(2), pages 176-187, March.
  3. Mark Aguiar & Gita Gopinath, 2004. "Defaultable Debt, Interest Rates and the Current Account," NBER Working Papers 10731, National Bureau of Economic Research, Inc.
  4. Fernando A Broner & Alberto Martin & Jaume Ventura, 2006. "Sovereign Risk and Secondary Markets," Working Papers 306, Barcelona Graduate School of Economics.
  5. Alberto Alesina & Guido Tabellini, 2005. "Why is fiscal policy often procyclical?," Harvard Institute of Economic Research Working Papers 2090, Harvard - Institute of Economic Research.
  6. Hausmann, Ricardo & Panizza, Ugo, 2003. "On the determinants of Original Sin: an empirical investigation," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 957-990, December.
  7. Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2001. "Currency crises and monetary policy in an economy with credit constraints," European Economic Review, Elsevier, vol. 45(7), pages 1121-1150.
  8. R. Gaston Gelos, Ratna Sahay and Guido Sandleris, 2008. "Sovereign Borrowing by Developing Countries: What Determines Market Access?," Business School Working Papers 2008-02, Universidad Torcuato Di Tella.
  9. Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003. "Debt intolerance," MPRA Paper 13932, University Library of Munich, Germany.
  10. Arteta, Carlos & Hale, Galina, 2008. "Sovereign debt crises and credit to the private sector," Journal of International Economics, Elsevier, vol. 74(1), pages 53-69, January.
  11. Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435 National Bureau of Economic Research, Inc.
  12. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October.
  13. Jeffrey Sachs & Daniel Cohen, 1982. "LDC Borrowing with Default Risk," NBER Working Papers 0925, National Bureau of Economic Research, Inc.
  14. Philippe Aghion & Philippe Bacchetta & Abhijit Banerjee, 2001. "A Corporate Balance-Sheet Approach to Currency Crises," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 01.14, Université de Lausanne, Faculté des HEC, DEEP.
  15. Michael Gavin & Roberto Perotti, 1997. "Fiscal Policy in Latin America," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 11-72 National Bureau of Economic Research, Inc.
  16. Eichengreen, Barry & Kletzer, Kenneth & Mody, Ashoka, 2003. "Crisis Resolution: Next Steps," Santa Cruz Center for International Economics, Working Paper Series qt4cj974r4, Center for International Economics, UC Santa Cruz.
  17. Harold L. Cole & James Dow & William B. English, 1994. "Default, settlement, and signalling: lending resumption in a reputational model of sovereign debt," Staff Report 180, Federal Reserve Bank of Minneapolis.
  18. Peter H. Lindert & Peter J. Morton, 1989. "How Sovereign Debt Has Worked," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 1: The International Financial System, pages 39-106 National Bureau of Economic Research, Inc.
  19. Andrew K. Rose, 2002. "One Reason Countries Pay their Debts: Renegotiation and International Trade," EUI-RSCAS Working Papers 18, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  20. Philip R. Lane, 2004. "Empirical Perspectives on Long-Term External Debt," The B.E. Journal of Macroeconomics, De Gruyter, vol. 0(1), pages 1.
  21. Jean-Charles Rochet, 2006. "Optimal Sovereign Debt: An Analytical Approach," Research Department Publications 4477, Inter-American Development Bank, Research Department.
  22. Harold L. Cole & Timothy J. Kehoe, 1998. "Self-fulfilling debt crises," Staff Report 211, Federal Reserve Bank of Minneapolis.
  23. Sandleris, Guido, 2008. "Sovereign defaults: Information, investment and credit," Journal of International Economics, Elsevier, vol. 76(2), pages 267-275, December.
  24. Cristina Arellano, 2008. "Default Risk and Income Fluctuations in Emerging Economies," American Economic Review, American Economic Association, vol. 98(3), pages 690-712, June.
  25. Jeremy A.Rogoff Bulow & Kenneth, 1986. "A Constant Recontracting Model of Sovereign Debt," University of Chicago - George G. Stigler Center for Study of Economy and State 43, Chicago - Center for Study of Economy and State.
  26. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
  27. Miguel Fuentes & Diego Saravia, 2009. "Sovereing Defaulters: Do International Capital Markets Punish Them?," Working Papers Central Bank of Chile 515, Central Bank of Chile.
  28. Emanuel Kohlscheen, 2006. "Why are there serial defaulters? Quasi-experimental evidence from Constitutions," WEF Working Papers 0003, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
  29. Alesina, A. & Prati, A. & Tabellini, G., 1989. "Public Confidence And Debt Management: A Model And A Case Study Of Italy," Papers 5, California Los Angeles - Applied Econometrics.
  30. Harald Finger & Mauro Mecagni, 2007. "Sovereign Debt Restructuring and Debt Sustainability: An Analysis of Recent Cross-Country Experience," IMF Occasional Papers 255, International Monetary Fund.
  31. Eaton, J., 1990. "Sovereign Debt, Reputation, And Credit Terms," ISER Discussion Paper 0223, Institute of Social and Economic Research, Osaka University.
  32. VJeffrey A. Frankel, 2005. "Mundell-Fleming Lecture: Contractionary Currency Crashes in Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 149-192, September.
  33. Emanuel Kohlscheen, 2010. "Sovereign risk: constitutions rule," Oxford Economic Papers, Oxford University Press, vol. 62(1), pages 62-85, January.
  34. Mark L. J. Wright, 2005. "Coordinating Creditors," American Economic Review, American Economic Association, vol. 95(2), pages 388-392, May.
  35. Axel Schimmelpfennig & Nouriel Roubini & Paolo Manasse, 2003. "Predicting Sovereign Debt Crises," IMF Working Papers 03/221, International Monetary Fund.
  36. Juan Carlos Hatchondo & Leonardo Martinez & Horacio Sapriza, 2007. "Quantitative models of sovereign default and the threat of financial exclusion," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 251-286.
  37. Andrew K. Rose & Mark M. Spiegel, 2002. "A gravity model of sovereign lending: trade, default and credit," Working Papers in Applied Economic Theory 2002-09, Federal Reserve Bank of San Francisco.
  38. Péter Banczúr & Cosmin Ilut, 2006. "Determinants of Spreads on Sovereign Bank Loans: The Role of Credit History," MNB Working Papers 2006/1, Magyar Nemzeti Bank (the central bank of Hungary).
  39. Frankel, Jeffrey, 2005. "Contractionary Currency Crashes In Developing Countries," Working Paper Series rwp05-017, Harvard University, John F. Kennedy School of Government.
  40. Enrique G. Mandoza & Vivian Z. Yue, 2008. "A solution to the default risk-business cycle disconnect," International Finance Discussion Papers 924, Board of Governors of the Federal Reserve System (U.S.).
  41. Aart Kraay & Vikram Nehru, 2006. "When Is External Debt Sustainable?," World Bank Economic Review, World Bank Group, vol. 20(3), pages 341-365.
  42. Ugo Panizza, 2008. "The External Debt Contentious Six Years after the Monterrey Consensus," G-24 Discussion Papers 51, United Nations Conference on Trade and Development.
  43. Alfaro, Laura & Kanczuk, Fabio, 2005. "Sovereign debt as a contingent claim: a quantitative approach," Journal of International Economics, Elsevier, vol. 65(2), pages 297-314, March.
  44. Faruk Gul & Wolfgang Pesendorfer, 2004. "Self-Control and the Theory of Consumption," Econometrica, Econometric Society, vol. 72(1), pages 119-158, 01.
  45. Juan Carlos Hatchondo & Leonardo Martinez & Horacio Sapriza, 2007. "The economics of sovereign defaults," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 163-187.
  46. Michael P. Dooley, 2000. "Can Output Losses Following International Financial Crises be Avoided?," NBER Working Papers 7531, National Bureau of Economic Research, Inc.
  47. Vivian Z. Yue & Enrique G. Mendoza, 2009. "A Solution to the Default Risk-Business Cycle Disconnect," 2009 Meeting Papers 76, Society for Economic Dynamics.
  48. Eduardo Levy Yeyati, 2006. "Optimal Debt? On the Insurance Value of International Debt Flows to Developing Countries," Business School Working Papers 2006-12, Universidad Torcuato Di Tella.
  49. Paul Krugman, 1999. "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, Springer, vol. 6(4), pages 459-472, November.
  50. Michael Tomz & Mark L. J. Wright, 2008. "Sovereign Theft: Theory And Evidence About Sovereign Default And Expropriation," CAMA Working Papers 2008-07, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  51. Javier Díaz-Cassou & Aitor Erce-Domínguez & Juan J. Vázquez-Zamora, 2008. "The role of the IMF in recent sovereign debt restructurings: Implications for the policy of lending into arrears," Banco de España Occasional Papers 0805, Banco de España.
  52. Jean Tirole, 2003. "Inefficient Foreign Borrowing: A Dual-and Common-Agency Perspective," Levine's Working Paper Archive 506439000000000136, David K. Levine.
  53. Marcos Chamon, 2004. "Can Debt Crises Be Self-Fulfilling?," IMF Working Papers 04/99, International Monetary Fund.
  54. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, vol. 78(1), pages 156-190, October.
  55. English, William B, 1996. "Understanding the Costs of Sovereign Default: American State Debts in the 1840's," American Economic Review, American Economic Association, vol. 86(1), pages 259-75, March.
  56. Ricardo J. Caballero & Arvind Krishnamurthy, 2004. "Fiscal Policy and Financial Depth," NBER Working Papers 10532, National Bureau of Economic Research, Inc.
  57. Atkeson, Andrew, 1991. "International Lending with Moral Hazard and Risk of Repudiation," Econometrica, Econometric Society, vol. 59(4), pages 1069-89, July.
  58. Andrea Pescatori & Amadou N R Sy, 2007. "Are Debt Crises Adequately Defined?," IMF Staff Papers, Palgrave Macmillan, vol. 54(2), pages 306-337, June.
  59. Andrew G Haldane & Adrian Penalver & Victoria Saporta & Hyun Song Shin, 2003. "Analytics of sovereign debt restructuring," Bank of England working papers 203, Bank of England.
  60. Richard Cantor & Frank Packer, 1995. "Sovereign credit ratings," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Jun.
  61. Dell'Ariccia, Giovanni & Schnabel, Isabel & Zettelmeyer, Jeromin, 2006. "How Do Official Bailouts Affect the Risk of Investing in Emerging Markets?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(7), pages 1689-1714, October.
  62. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 2004. "Government guarantees and self-fulfilling speculative attacks," Journal of Economic Theory, Elsevier, vol. 119(1), pages 31-63, November.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Sovereign Debt Defaults
    by Agent Continuum in Agent Continuum on 2010-05-09 05:13:30
  2. Notas sueltas sobre el rescate de España
    by Cives in Politikon on 2012-06-09 20:43:49
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aea:jeclit:v:47:y:2009:i:3:p:651-98

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.