IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Risk Sharing with the Monarch: Contigent Debt and Excusable Defaults in the Age of Philip II, 1556-1598

  • Drelichman, Mauricio
  • Voth, Hans-Joachim

Contingent sovereign debt has the potential to create important welfare gains--but actual issuance is rare. Using hand-collected archival data, we examine the first known case of large-scale issuance of contingent sovereign debt in history. Philip II of Spain entered into hundreds of contracts whose value and due date was contingent upon verifiable, exogenous events such as the arrival of silver fleets. This allowed for effective risk-sharing between the king and his bankers. The defaults that occurred were excusable, occurred in bad states of the world, and under conditions that could not be foreseen or contracted on ex ante.

If 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.

File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8492
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8492.

as
in new window

Length:
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:cpr:ceprdp:8492
Contact details of provider: Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


References listed on IDEAS
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.:

as in new window
  1. Arellano, Cristina, 2008. "Default risk and income fluctuations in emerging economies," MPRA Paper 7867, University Library of Munich, Germany.
  2. Patrick Bolton & Olivier Jeanne, 2007. "Structuring and Restructuring Sovereign Debt; The Role of a Bankruptcy Regime," IMF Working Papers 07/192, International Monetary Fund.
  3. Kenneth M. Kletzer & Brian D. Wright, 2000. "Sovereign Debt as Intertemporal Barter," International Finance 0003004, EconWPA.
  4. Michael Tomz & Mark L. J. Wright, 2007. "Do countries default in “bad times”?," Working Paper Series 2007-17, Federal Reserve Bank of San Francisco.
  5. Bulow, Jeremy & Rogoff, Kenneth, 1989. "A Constant Recontracting Model of Sovereign Debt," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 155-78, February.
  6. David Benjamin & Mark L. J. Wright, 2009. "Recovery Before Redemption: A Theory Of Delays In Sovereign Debt Renegotiations," CAMA Working Papers 2009-15, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  7. Harold L. Cole & James Dow & William B. English, 1994. "Default, settlement, and signalling: lending resumption in a reputational model of sovereign debt," Staff Report 180, Federal Reserve Bank of Minneapolis.
  8. Yue, Vivian Z., 2010. "Sovereign default and debt renegotiation," Journal of International Economics, Elsevier, vol. 80(2), pages 176-187, March.
  9. David Benjamin, 2008. "Recovery Before Redemption," 2008 Meeting Papers 531, Society for Economic Dynamics.
  10. Andrew Atkeson, 2010. "International lending with moral hazard and risk of repudiation," Levine's Working Paper Archive 200, David K. Levine.
  11. Eduardo Borensztein & Olivier Jeanne & Paolo Mauro & Jeromin Zettelmeyer & Marcos Chamon, 2005. "Sovereign Debt Structure for Crisis Prevention," IMF Occasional Papers 237, International Monetary Fund.
  12. Lvarez-Nogal, Carlos & Prados De La Escosura, Leandro, 2007. "The decline of Spain (1500 1850): conjectural estimates," European Review of Economic History, Cambridge University Press, vol. 11(03), pages 319-366, December.
  13. Mauricio Drelichman & Hans-Joachim Voth, 2008. "Debt Sustainability in Historical Perspective: The Role of Fiscal Repression," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 657-667, 04-05.
  14. Cole, Harold L. & Kehoe, Patrick J., 1995. "The role of institutions in reputation models of sovereign debt," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 45-64, February.
  15. Cox, Gary W, 2011. "War, Moral Hazard, and Ministerial Responsibility: England After the Glorious Revolution," The Journal of Economic History, Cambridge University Press, vol. 71(01), pages 133-161, March.
  16. James Conklin, 1998. "The Theory of Sovereign Debt and Spain under Philip II," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 483-513, June.
  17. Andrew K. Rose, 2001. "One reason countries pay their debts: renegotiation and international trade," Staff Reports 142, Federal Reserve Bank of New York.
  18. Eduardo Borensztein & Paolo Mauro, 2004. "The case for GDP-indexed bonds," Economic Policy, CEPR;CES;MSH, vol. 19(38), pages 165-216, 04.
  19. Carlos Álvarez Nogal [canogal] & Christophe Chamley, 2011. "Debt policy under constraints between Philip II, the Cortes and Genoese bankers," Working Papers in Economic History wp11-06, Universidad Carlos III, Instituto Figuerola de Historia y Ciencias Sociales.
  20. Grossman, Herschel I & Van Huyck, John B, 1988. "Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation, and Reputation," American Economic Review, American Economic Association, vol. 78(5), pages 1088-97, December.
  21. Patrick Bolton & Olivier Jeanne, 2009. "Structuring and Restructuring Sovereign Debt: The Role of Seniority -super-1," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 879-902.
  22. Mark Billings, 2010. "This time is different: eight centuries of financial folly," Accounting History Review, Taylor & Francis Journals, vol. 20(3), pages 417-420.
  23. repec:acb:camaaa:2009-15 is not listed on IDEAS
  24. Ranald Michie, 2010. "This time is different: eight centuries of financial folly," Business History, Taylor & Francis Journals, vol. 52(4), pages 689-691.
  25. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973, April.
  26. Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Wiley Blackwell, vol. 48(2), pages 289-309, April.
  27. Alfaro, Laura & Kanczuk, Fabio, 2005. "Sovereign debt as a contingent claim: a quantitative approach," Journal of International Economics, Elsevier, vol. 65(2), pages 297-314, March.
  28. Eichengreen, Barry, 2002. "Financial Crises and What to Do About Them," OUP Catalogue, Oxford University Press, number 9780199257447, March.
  29. Natalia Kovrijnykh & Balázs Szentes, 2007. "Equilibrium Default Cycles," Journal of Political Economy, University of Chicago Press, vol. 115, pages 403-446.
  30. Mitchener, Kris James & Weidenmier, Marc D., 2010. "Supersanctions and sovereign debt repayment," Journal of International Money and Finance, Elsevier, vol. 29(1), pages 19-36, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:8492. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.