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Creditors' Losses Versus Debt Relief: Results from a Decade of Sovereign Debt Crises

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  • Federico Sturzenegger
  • Jeromin Zettelmeyer

Abstract

This paper computes debt relief and investor losses associated with the major emerging market defaults and debt restructurings of the 1998-2005 period. Investor losses ranged from 13% to 75%, based on comparing the market value of the new debt with the net present value of the old debt evaluated at the sovereign yield immediately following the debt exchange. However, the net present value of debt relief from a country perspective, calculated using estimated country borrowing rates in normal times, was typicallylower. In many cases, countries could have lowered their remaining debt burdens, for given investor losses, by making their debtrestructuring offers more front-loaded. The fact that they did not do so suggests that debtor countries did not expect to enjoy stableaccess to international credit markets even outside the typical exclusion period following a default. (JEL: F34) (c) 2007 by the European Economic Association.

Suggested Citation

  • Federico Sturzenegger & Jeromin Zettelmeyer, 2007. "Creditors' Losses Versus Debt Relief: Results from a Decade of Sovereign Debt Crises," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 343-351, 04-05.
  • Handle: RePEc:tpr:jeurec:v:5:y:2007:i:2-3:p:343-351
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    Citations

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    Cited by:

    1. Péter Benczúr & Cosmin L. Ilut, 2016. "Evidence for Relational Contracts in Sovereign Bank Lending," Journal of the European Economic Association, European Economic Association, vol. 14(2), pages 375-404.
    2. Javier Díaz-Cassou & Aitor Erce-Domínguez & Juan J. Vázquez-Zamora, 2008. "The role of the IMF in recent sovereign debt restructurings: Implications for the policy of lending into arrears," Occasional Papers 0805, Banco de España;Occasional Papers Homepage.
    3. 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.
    4. Enderlein, Henrik & Trebesch, Christoph & von Daniels, Laura, 2012. "Sovereign debt disputes: A database on government coerciveness during debt crises," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 250-266.
    5. 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 651-698, September.
    6. Aitor Erce, 2013. "Sovereign debt restructurings and the IMF: implications for future official interventions," Globalization and Monetary Policy Institute Working Paper 143, Federal Reserve Bank of Dallas.
    7. Carmen M. Reinhart & Christoph Trebesch, 2014. "A Distant Mirror of Debt, Default, and Relief," NBER Working Papers 20577, National Bureau of Economic Research, Inc.
    8. Jeromin Zettelmeyer & Christoph Trebesch & Mitu Gulati, 2013. "The Greek debt restructuring: an autopsy," Economic Policy, CEPR;CES;MSH, vol. 28(75), pages 513-563, July.
    9. Javier Díaz-Cassou & Aitor Erce-Domínguez & Juan J. Vázquez-Zamora, 2008. "Recent episodes of sovereign debt restructurings. A case-study approach," Occasional Papers 0804, Banco de España;Occasional Papers Homepage.
    10. Carmen M. Reinhart & Christoph Trebesch, 2016. "Sovereign Debt Relief And Its Aftermath," Journal of the European Economic Association, European Economic Association, vol. 14(1), pages 215-251, February.
    11. Peter Benczur & Cosmin Ilut, 2011. "Evidence for Dynamic Contracts in Sovereign Bank Lending," Working Papers 11-06, Duke University, Department of Economics.
    12. Gabriel Mihalache, 2017. "Sovereign Default Resolution Through Maturity Extension," Department of Economics Working Papers 17-08, Stony Brook University, Department of Economics.
    13. Andrade, Sandro C., 2009. "A model of asset pricing under country risk," Journal of International Money and Finance, Elsevier, vol. 28(4), pages 671-695, June.

    More about this item

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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