Sovereign Risk : Constitutions Rule
AbstractThis paper models the executive’s choice of whether to reschedule external debt as the outcome of an intra-governmental negotiation process. The executive’s necessity of a confidence vote from the legislature is found to provide the rationale for why some democracies may not renegotiate their foreign obligations. Empirically, parliamentary democracies are indeed less prone to reschedule their foreign liabilities or accumulate arrears on them. Most of the democracies that have been able to significantly reduce their debt/GNP ratio without a ’credit incident’ were parliamentary. Moreover, countries with stronger political checks on the executive and lower executive turnover have a lower rescheduling propensity. These results suggest that North andWeingast’s account of the evolution of institutions in 17th century England gives substantial mileage in understanding the international debt markets in the contemporary developing world.
Download InfoIf 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.
Bibliographic InfoPaper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 731.
Length: 51 pages
Date of creation: 2005
Date of revision:
Other versions of this item:
- F30 - International Economics - - International Finance - - - General
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
This paper has been announced in the following NEP Reports:
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.:
- Alesina, A. & Drazen, A., 1991.
"Why Are Stabilizations Delayed?,"
6-91, Tel Aviv - the Sackler Institute of Economic Studies.
- Roberto Chang, 2005.
"Financial Crises and Political Crises,"
NBER Working Papers
11779, National Bureau of Economic Research, Inc.
- Rudi Dornbusch, 2001. "Malaysia: Was it Different?," NBER Working Papers 8325, National Bureau of Economic Research, Inc.
- Bulow, Jeremy & Rogoff, Kenneth, 1989.
"Sovereign Debt: Is to Forgive to Forget?,"
American Economic Review,
American Economic Association, vol. 79(1), pages 43-50, March.
- Bulow, J. & Rogoff, K., 1988. "Sovereign Debt: Is To Forgive To Forget?," Papers 411, Stockholm - International Economic Studies.
- Jeremy Bulow & Kenneth Rogoff, 1998. "Sovereign Debt: Is to Forgive to Forget," Levine's Working Paper Archive 209, David K. Levine.
- Jeremy I. Bulow & Kenneth Rogoff, 1988. "Sovereign Debt: Is To Forgive To Forget?," NBER Working Papers 2623, National Bureau of Economic Research, Inc.
- Block, Steven A. & Vaaler, Paul M., 2004. "The price of democracy: sovereign risk ratings, bond spreads and political business cycles in developing countries," Journal of International Money and Finance, Elsevier, vol. 23(6), pages 917-946, October.
- Torsten Persson & Guido Tabellini, 2005. "The Economic Effects of Constitutions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661926, June.
- Lars P. Feld & Stefan Voigt, 2003.
"Economic Growth and Judicial Independence: Cross Country Evidence Using a New Set of Indicators,"
CESifo Working Paper Series
906, CESifo Group Munich.
- Feld, Lars P. & Voigt, Stefan, 2003. "Economic growth and judicial independence: cross-country evidence using a new set of indicators," European Journal of Political Economy, Elsevier, vol. 19(3), pages 497-527, September.
- Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003.
13932, University Library of Munich, Germany.
- Emanuel Kohlscheen & Stephen A O'Connell, 2006.
"A Sovereign Debt Model with Trade Credit and Reserves,"
WEF Working Papers
0004, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
- Kohlscheen, Emanuel & O'Connell, Stephen A., 2006. "A Sovereign Debt Model with Trade Credit and Reserves," The Warwick Economics Research Paper Series (TWERPS) 743, University of Warwick, Department of Economics.
- W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, 03.
- Manuel Amador, 2004. "A Political Model Sovereign Debt Repayment," 2004 Meeting Papers 762, Society for Economic Dynamics.
- Babbel, D.F., 1996. "Insuring Sovereign Debt Against Default," World Bank - Discussion Papers 328, World Bank.
- Alessandro Riboni, 2004. "Time Consistency in Dynamic Bargaining: The Role of Committees as Substitutes for Commitment," 2004 Meeting Papers 684, Society for Economic Dynamics.
- Peter H. Lindert & Peter J. Morton, 1989.
"How Sovereign Debt Has Worked,"
in: Developing Country Debt and the World Economy, pages 225-236
National Bureau of Economic Research, Inc.
- Bertschek, Irene & Lechner, Michael, 1998.
"Convenient estimators for the panel probit model,"
Journal of Econometrics,
Elsevier, vol. 87(2), pages 329-371, September.
- Daniel Kaufmann & Aart Kraay & Massimo Mastruzzi, 2003.
"Governance Matters III: Governance Indicators for 1996-2002,"
Development and Comp Systems
- Daniel Kaufmann & Aart Kraay & Massimo Mastruzzi, 2003. "Governance Matters III: Governance Indicators for 1996-2002," Macroeconomics 0308006, EconWPA.
- repec:rus:hseeco:123922 is not listed on IDEAS
- Alessandro Riboni, 2010. "Committees As Substitutes For Commitment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 213-236, 02.
- North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
- Acemoglu, Daron & Robinson, James A, 2006.
"Persistence of Power, Elites and Institutions,"
CEPR Discussion Papers
5603, C.E.P.R. Discussion Papers.
- Michael Tomz & Mark L.J. Wright, 2013.
"Empirical Research on Sovereign Debt and Default,"
Annual Review of Economics,
Annual Reviews, vol. 5(1), pages 247-272, 05.
- 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.
- Michael Tomz & Mark L. J. Wright, 2013. "Empirical Research on Sovereign Debt and Default," NBER Working Papers 18855, National Bureau of Economic Research, Inc.
- Michael Tomz & Mark L. J. Wright, 2012. "Empirical research on sovereign debt and default," Working Paper Series WP-2012-06, Federal Reserve Bank of Chicago.
- Zeaiter, Hussein Zeaiter, 2013. "Sovereign Debt Defaults: Evidence using Extreme bounds Analysis," Working Papers 32/2013, Universidade Portucalense, Centro de Investigação em Gestão e Economia (CIGE).
- Dirk Niepelt, 2009. "Sovereign Debt Maturity without Commitment," 2009 Meeting Papers 231, Society for Economic Dynamics.
- repec:fip:fedreq:y:2010:i:3q:p:291-317:n:vol.96no.3 is not listed on IDEAS
- Niepelt, Dirk, 2008.
"Debt Maturity without Commitment,"
CEPR Discussion Papers
7093, C.E.P.R. Discussion Papers.
- Caroline Rijckeghem & Beatrice Weder, 2009. "Political institutions and debt crises," Public Choice, Springer, vol. 138(3), pages 387-408, March.
- Ugo Panizza & Federico Sturzenegger & Jeromin Zettelmeyer, 2010.
"International Government Debt,"
UNCTAD Discussion Papers
199, United Nations Conference on Trade and Development.
- Sebastian M. Saiegh, 2009. "Coalition Governments And Sovereign Debt Crises," Economics and Politics, Wiley Blackwell, vol. 21(2), pages 232-254, 07.
- Juan Carlos Hatchondo & Leonardo Martinez, 2010. "The politics of sovereign defaults," Economic Quarterly, Federal Reserve Bank of Richmond, issue 3Q, pages 291-317.
- Amrita Dhillon & Javier García-Fronti & Sayantan Ghosal & Marcus Miller, 2006. "Debt Restructuring and Economic Recovery: Analysing the Argentine Swap," The World Economy, Wiley Blackwell, vol. 29(4), pages 377-398, 04.
- Ugo Panizza & Federico Sturzenegger & Jeromin Zettelmeyer, 2009. "The Economics and Law of Sovereign Debt and Default," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 651-98, September.
- Samuel W. Malone, 2011. "Sovereign indebtedness, default, and gambling for redemption," Oxford Economic Papers, Oxford University Press, vol. 63(2), pages 331-354, April.
- Markus Jorra, 2011. "The Heterogeneity of Default Costs: Evidence from Recent Sovereign Debt Crises," MAGKS Papers on Economics 201151, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Waldenström, Daniel, 2010. "Why does sovereign risk differ for domestic and external debt? Evidence from Scandinavia, 1938-1948," Journal of International Money and Finance, Elsevier, vol. 29(3), pages 387-402, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helen Neal).
If references are entirely missing, you can add them using this form.