IDEAS home Printed from https://ideas.repec.org/a/spr/revepe/v2y2021i3d10.1007_s43253-021-00058-z.html
   My bibliography  Save this article

Ties that bind and blur: financialization and the evolution of sovereign debt as private contract

Author

Listed:
  • Giselle Datz

    (Virginia Tech)

Abstract

The rich scholarship on the politics and finance of sovereign debt tends to take for granted debt’s most basic form: as a private contract. Nevertheless, legal challenges have been central to the contemporary evolution of sovereign debt dynamics thanks to litigating strategies rendered possible by — mostly standard — contractual stipulations in international sovereign bonds. By using a debt-as-private-contract lens, the paper highlights how exposed sovereign debtors present themselves to these global transactions, how foreign sovereign bond contracts anchor otherwise footloose finance in particular jurisdictions, and how contractual changes sparked by outlier cases of protracted litigation or recent turbulence in debt exchanges have been key to global efforts to reform debt governance around market-based parameters. The legal battle between Argentina and its holdout creditors in US courts is analyzed here to illustrate these dynamics given its significance in sparking contractual revisions. Ultimately, it is clear that credit and contract are inextricably linked. Contractual evolution is revealing of the legal risks taken on by sovereign debtors and their creditors in private markets. The cost of debt hence may go beyond relatively predictable financial calculations.

Suggested Citation

  • Giselle Datz, 2021. "Ties that bind and blur: financialization and the evolution of sovereign debt as private contract," Review of Evolutionary Political Economy, Springer, vol. 2(3), pages 571-587, December.
    • Handle: RePEc:spr:revepe:v:2:y:2021:i:3:d:10.1007_s43253-021-00058-z
    DOI: 10.1007/s43253-021-00058-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s43253-021-00058-z
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s43253-021-00058-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Horn, Sebastian & Reinhart, Carmen M. & Trebesch, Christoph, 2021. "China's overseas lending," Journal of International Economics, Elsevier, vol. 133(C).
    2. Maurice Obstfeld & Alan M. Taylor, 2003. "Globalization and Capital Markets," NBER Chapters, in: Globalization in Historical Perspective, pages 121-188, National Bureau of Economic Research, Inc.
    3. Marc Flandreau & Juan H. Flores & Norbert Gaillard & Sebastián Nieto-Parra, 2010. "The End of Gatekeeping: Underwriters and the Quality of Sovereign Bond Markets, 1815–2007," NBER Chapters, in: NBER International Seminar on Macroeconomics 2009, pages 53-92, National Bureau of Economic Research, Inc.
    4. B. Peter Rosendorff & Eric Arias & Layna Mosely, 2020. "Financial Statecraft: Government Choice of Debt Instruments," Working Papers 822, Economic Research Southern Africa.
    5. Graciela L. Kaminsky & Carmen Reinhart, 2003. "The Center and the Periphery: The Globalization of Financial Turmoil," NBER Working Papers 9479, National Bureau of Economic Research, Inc.
    6. Kay Chung & Michael G. Papaioannou, 2021. "Do Enhanced Collective Action Clauses Affect Sovereign Borrowing Costs?," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(15), pages 59-87, October.
    7. Chuck Fang & Julian Schumacher & Christoph Trebesch, 2021. "Restructuring Sovereign Bonds: Holdouts, Haircuts and the Effectiveness of CACs," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(1), pages 155-196, March.
    8. Ewa Karwowski & Marcos Centurion-Vicencio, 2018. "Financialising the state : recent developments in fiscal and monetary policy," Working Papers halshs-01713028, HAL.
    9. Chamon, Marcos & Schumacher, Julian & Trebesch, Christoph, 2018. "Foreign-Law Bonds: Can They Reduce Sovereign Borrowing Costs?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 114, pages 164-179.
    10. Michael Schwan & Christine Trampusch & Florian Fastenrath, 2021. "Financialization of, not by the State. Exploring Changes in the Management of Public Debt and Assets across Europe," Review of International Political Economy, Taylor & Francis Journals, vol. 28(4), pages 820-842, July.
    11. Guillermo A. Calvo, 1998. "CAPITAL FLOWS AND CAPITAL-MARKET CRISES: The Simple Economics of Sudden Stops," Journal of Applied Economics, Taylor & Francis Journals, vol. 1(1), pages 35-54, November.
    12. Pistor, Katharina, 2013. "Law in Finance," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 311-314.
    13. Chris Brummer, 2010. "Why Soft Law Dominates International Finance--and not Trade," Journal of International Economic Law, Oxford University Press, vol. 13(3), pages 623-643, September.
    14. Eric Helleiner, 2008. "The Mystery of the Missing Sovereign Debt Restructuring Mechanism," Contributions to Political Economy, Cambridge Political Economy Society, vol. 27(1), pages 91-113.
    15. Flandreau, Marc, 2017. "Reputation, Regulation and the Collapse of International Capital Markets, 1920-1935," CEPR Discussion Papers 11747, C.E.P.R. Discussion Papers.
    16. Pistor, Katharina, 2013. "A legal theory of finance," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 315-330.
    17. Zilberman, David & Kaplan, Scott & Gordon, Ben, 2018. "The political economy of labeling," Food Policy, Elsevier, vol. 78(C), pages 6-13.
    18. Christoph Trebesch & Mr. Michael G. Papaioannou & Mr. Udaibir S Das, 2012. "Sovereign Debt Restructurings 1950-2010: Literature Survey, Data, and Stylized Facts," IMF Working Papers 2012/203, International Monetary Fund.
    19. Stephen Choi & G. Gulati, "undated". "Innovation in Boilerplate Contracts: An Empirical Examination of Sovereign Bonds," University of Southern California Legal Working Paper Series usclwps-1006, University of Southern California Law School.
    20. Michael Bradley & Elisabeth de Fontenay & Irving Arturo de Lira Salvatierra & Mitu Gulati, 2018. "Pricing Sovereign Debt: Foreign versus Local Parameters," European Financial Management, European Financial Management Association, vol. 24(2), pages 261-297, March.
    21. Florian Fastenrath & Michael Schwan & Christine Trampusch, 2017. "Where states and markets meet: the financialisation of sovereign debt management," New Political Economy, Taylor & Francis Journals, vol. 22(3), pages 273-293, May.
    22. M. Ayhan Kose & Peter Nagle & Franziska Ohnsorge & Naotaka Sugawara, 2021. "Global Waves of Debt," World Bank Publications - Books, The World Bank Group, number 32809, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mitchener, Kris & Trebesch, Christoph, 2021. "Sovereign Debt in the 21st Century: Looking Backward, Looking Forward," CEPR Discussion Papers 15935, C.E.P.R. Discussion Papers.
    2. Schumacher, Julian & Trebesch, Christoph & Enderlein, Henrik, 2021. "Sovereign defaults in court," Journal of International Economics, Elsevier, vol. 131(C).
    3. Chuck Fang & Julian Schumacher & Christoph Trebesch, 2021. "Restructuring Sovereign Bonds: Holdouts, Haircuts and the Effectiveness of CACs," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(1), pages 155-196, March.
    4. Nicoletta Layher & Eyden Samunderu, 2020. "The Impact of the Introduction of Uniform European Collective Action Clauses on European Government Bonds as a Regulatory Result of the European Sovereign Debt Crisis," JRFM, MDPI, vol. 14(1), pages 1-32, December.
    5. Ohnsorge, Franziska & Kose, M. Ayhan & Sugawara, Naotaka, 2020. "Benefits and Costs of Debt: The Dose Makes the Poison," CEPR Discussion Papers 14439, C.E.P.R. Discussion Papers.
    6. Sebastian Horn & Carmen M. Reinhart & Christoph Trebesch, 2022. "Hidden Defaults," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 531-535, May.
    7. Bradley, Michael & De Lira Salvatierra, Irving & Gulati, Mitu, 2014. "Lawyers: Gatekeepers of the sovereign debt market?," International Review of Law and Economics, Elsevier, vol. 38(S), pages 150-168.
    8. Carmen M. Reinhart, 2022. "From Health Crisis to Financial Distress," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(1), pages 4-31, March.
    9. M. Ayhan Kose & Peter Nagle & Franziska Ohnsorge & Naotaka Sugawara, 2021. "What has been the impact of COVID-19 on debt? Turning a wave into a tsunami," CAMA Working Papers 2021-99, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    10. Panizza, Ugo & Bolton, Patrick & Gulati, Mitu, 2022. "Sovereign Debt Puzzles," CEPR Discussion Papers 17742, C.E.P.R. Discussion Papers.
    11. Josefin Meyer & Carmen M Reinhart & Christoph Trebesch, 2022. "Sovereign Bonds Since Waterloo," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(3), pages 1615-1680.
    12. M. Ayhan Kose & Peter S. O. Nagle & Franziska Ohnsorge & Naotaka Sugawara, 2020. "Can This Time Be Different? Policy Options in Times of Rising Debt," Koç University-TUSIAD Economic Research Forum Working Papers 2008, Koc University-TUSIAD Economic Research Forum.
    13. Augusto De La Torre & Eduardo Levy Yeyati & Sergio L. Schmukler, 2002. "Financial Globalization: Unequal Blessings," International Finance, Wiley Blackwell, vol. 5(3), pages 335-357, November.
    14. Mr. Tamon Asonuma & Mr. Marcos d Chamon & Aitor Erce & Akira Sasahara, 2019. "Costs of Sovereign Defaults: Restructuring Strategies, Bank Distress and the Capital Inflow-Credit Channel," IMF Working Papers 2019/069, International Monetary Fund.
    15. Christophe Destais & Frederik Eidam & Friedrich Heinemann, 2019. "The design of a sovereign debt restructuring mechanism for the euro area: Choices and trade-offs," EconPol Policy Reports 11, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    16. Armin Mertens & Christine Trampusch & Florian Fastenrath & Rebecca Wangemann, 2021. "The political economy of local government financialization and the role of policy diffusion," Regulation & Governance, John Wiley & Sons, vol. 15(2), pages 370-387, April.
    17. Eswar S. Prasad & Kenneth Rogoff & Shang-Jin Wei & M. Ayhan Kose, 2007. "Financial Globalization, Growth and Volatility in Developing Countries," NBER Chapters, in: Globalization and Poverty, pages 457-516, National Bureau of Economic Research, Inc.
    18. Flores Zendejas, Juan, 2015. "Capital Markets and Sovereign Defaults: A Historical Perspective," Working Papers unige:73325, University of Geneva, Paul Bairoch Institute of Economic History.
    19. Brooks Skylar & Lombardi Domenico, 2015. "Governing Sovereign Debt Restructuring Through Regulatory Standards," Journal of Globalization and Development, De Gruyter, vol. 6(2), pages 287-318, December.
    20. Jakob Korbinian Eberl, 2016. "The Collateral Framework of the Eurosystem and Its Fiscal Implications," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 69.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:revepe:v:2:y:2021:i:3:d:10.1007_s43253-021-00058-z. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.