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Sovereign debt guarantees and default: Lessons from the UK and Ireland, 1920–1938

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  • Foley-Fisher, Nathan
  • McLaughlin, Eoin

Abstract

We study the daily yields on Irish land bonds listed on the Dublin Stock Exchange during the years 1920–1938. We exploit Irish events during the period and structural differences in land bonds to tease out a measure of investors׳ credibility in a UK sovereign guarantee. Using Ireland׳s default on intergovernmental payments in 1932, we find a premium of about 43 basis points associated with uncertainty about the UK government guarantee. We discuss the economic and political forces behind the Irish and UK governments׳ decisions pertaining to the default. Our finding has implications for modern-day proposals to issue jointly-guaranteed sovereign debt.

Suggested Citation

  • Foley-Fisher, Nathan & McLaughlin, Eoin, 2016. "Sovereign debt guarantees and default: Lessons from the UK and Ireland, 1920–1938," European Economic Review, Elsevier, vol. 87(C), pages 272-286.
  • Handle: RePEc:eee:eecrev:v:87:y:2016:i:c:p:272-286
    DOI: 10.1016/j.euroecorev.2016.05.010
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    Cited by:

    1. FitzGerald, John & Kenny, Seán, 2018. "Managing a Century of Debt," Lund Papers in Economic History 171, Lund University, Department of Economic History.

    More about this item

    Keywords

    Irish land bonds; Dublin Stock Exchange; Sovereign default; Debt guarantees;

    JEL classification:

    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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