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Coalition Governments And Sovereign Debt Crises

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  • SEBASTIAN M. SAIEGH
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    Abstract

    This article examines the domestic politics of sovereign debt crises. I focus on two alternative mechanisms that aggregate the preferences of domestic actors over debt repayment: single-party versus multiparty coalition governments. I uncover a very strong empirical regularity using cross-national data from 48 developing countries between 1971 and 1997. Countries that are governed by a coalition of parties are less likely to reschedule their debts than those under single-party governments. The effect of multiparty coalitions on sovereign defaults is quantitatively large and roughly of the same order of magnitude as liquidity factors such as debt burden and debt service. These results are robust to numerous specifications and samples. Copyright 2009 The Author. Journal compilation 2009 Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Economics & Politics.

    Volume (Year): 21 (2009)
    Issue (Month): 2 (07)
    Pages: 232-254

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    Handle: RePEc:bla:ecopol:v:21:y:2009:i:2:p:232-254

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    1. Kevin Cowan & Eduardo Levy-Yeyati & Ugo Panizza & Federico Sturzenegger, 2006. "Sovereign Debt in the Americas: New Data and Stylized Facts," Working Papers Central Bank of Chile 371, Central Bank of Chile.
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    8. Kohlscheen, Emanuel, 2005. "Sovereign Risk : Constitutions Rule," The Warwick Economics Research Paper Series (TWERPS) 731, University of Warwick, Department of Economics.
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    12. Nouriel Roubini & Paolo Manasse, 2005. "Rules of Thumb for Sovereign Debt Crises," IMF Working Papers 05/42, International Monetary Fund.
    13. David Austen-Smith, 2000. "Redistributing Income under Proportional Representation," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1235-1269, December.
    14. Min, Hong-Ghi & Lee, Duk-Hee & Nam, Changi & Park, Myeong-Cheol & Nam, Sang-Ho, 2003. "Determinants of emerging-market bond spreads: Cross-country evidence," Global Finance Journal, Elsevier, vol. 14(3), pages 271-286, December.
    15. Feder, Gershon & Just, Richard E., 1977. "A study of debt servicing capacity applying logit analysis," Journal of Development Economics, Elsevier, vol. 4(1), pages 25-38, February.
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      • Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003. "Debt intolerance," MPRA Paper 13932, University Library of Munich, Germany.
    17. Aart Kraay & Vikram Nehru, 2006. "When Is External Debt Sustainable?," World Bank Economic Review, World Bank Group, vol. 20(3), pages 341-365.
    18. Michael Tomz & Mark L. J. Wright, 2007. "Do countries default in “bad times”?," Working Paper Series 2007-17, Federal Reserve Bank of San Francisco.
    19. Jeffrey Sachs & Daniel Cohen, 1982. "LDC Borrowing with Default Risk," NBER Working Papers 0925, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Michael Tomz & Mark L. J. Wright, 2013. "Empirical Research on Sovereign Debt and Default," CAMA Working Papers 2013-16, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Eichler, Stefan & Hofmann, Michael, 2013. "Sovereign default risk and decentralization: Evidence for emerging markets," European Journal of Political Economy, Elsevier, vol. 32(C), pages 113-134.
    3. Sergio Bejar & Bumba Mukherjee & Will Moore, 2011. "Time horizons matter: the hazard rate of coalition governments and the size of government," Economics of Governance, Springer, vol. 12(3), pages 201-235, September.
    4. Christoph A. Schaltegger & Martin Weder, 2013. "Fiscal Adjustments and the Probability of Sovereign Default," CREMA Working Paper Series 2013-06, Center for Research in Economics, Management and the Arts (CREMA).
    5. Yu Wang, 2013. "Veto Players and Foreign Aid Inflows," Oxford Development Studies, Taylor & Francis Journals, vol. 41(3), pages 391-408, September.

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