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The bondholder, the sovereign, and the banker: sovereign debt and bondholders' protection before 1914

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  • Rui Pedro Esteves

Abstract

This paper studies the role of market-based solutions in the enforcement of sovereign debt contracts. A simple theoretical framework implies that there is scope for bondholders' committees to improve the governance of the market, as measured by the frequency and outcome of defaults. We test this hypothesis with an original data set of sovereign defaults, 1870-1913. This first period of financial globalization is an ideal test ground as it was immune to interventions by multilaterals, which can aggravate moral hazard problems during arrears. The empirical results confirm the potential relevance of bondholder's self-help organizations for ordered workouts of defaults. Copyright , Oxford University Press.

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  • Rui Pedro Esteves, 2013. "The bondholder, the sovereign, and the banker: sovereign debt and bondholders' protection before 1914," European Review of Economic History, Oxford University Press, vol. 17(4), pages 389-407, November.
  • Handle: RePEc:oup:ereveh:v:17:y:2013:i:4:p:389-407
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    File URL: http://hdl.handle.net/10.1093/ereh/het016
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    Cited by:

    1. Ran Bi & Marcos Chamon & Jeromin Zettelmeyer, 2016. "The Problem that Wasn’t: Coordination Failures in Sovereign Debt Restructurings," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(3), pages 471-501, August.
    2. 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.
    3. Ecchia, Stefania, 2016. "La controversia tra la Camera di Commercio di Roma e il Consiglio del Debito Pubblico Ottomano sulla conversione delle obbligazioni privilegiate del 1890
      [The dispute between the Chamber of Commerc
      ," MPRA Paper 72670, University Library of Munich, Germany.
    4. Graciela Laura Kaminsky & Pablo Vega-García, 2016. "Systemic And Idiosyncratic Sovereign Debt Crises," Journal of the European Economic Association, European Economic Association, vol. 14(1), pages 80-114, February.
    5. Sasha Indarte, 2017. "Contagion via Financial Intermediaries in Pre-1914 Sovereign Debt Markets," 2017 Meeting Papers 1141, Society for Economic Dynamics.

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