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Speculative-Grade sovereign rating Cycles: Sovereign debt Defaults, restructurings and resolution

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  • Agnello, Luca
  • Castro, Vítor
  • Sousa, Ricardo M.

Abstract

We analyse how defaults, debt restructurings and resolution affect the duration of low sovereign rating cycles in a change-point Weibull duration model setup. Using a large panel of sovereign ratings data issued by the three largest credit rating agencies, we show that sovereigns implementing nominal debt relief during defaults or with an history of debt restructurings (including those supported by multilateral institutions) or (long) exits from international capital markets hardly escape the ’curse’ of protracted speculative-grade spells. Governments also tend to discriminate between domestic and foreign agents, ’prioritising’ foreign currency defaults.

Suggested Citation

  • Agnello, Luca & Castro, Vítor & Sousa, Ricardo M., 2025. "Speculative-Grade sovereign rating Cycles: Sovereign debt Defaults, restructurings and resolution," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:intfin:v:103:y:2025:i:c:s1042443125000873
    DOI: 10.1016/j.intfin.2025.102197
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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