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On The Stock of External Sovereign Debt

Author

Listed:
  • Mark Wright

    (UCLA)

  • Christine Richmond

    (International Monetary Fund)

  • Daniel Dias

    (UIUC - Economics & Cemapre)

Abstract

Data on the stock of sovereign debt are typically presented at "face value", defined as the undiscounted sum of future principal repayments. This measure has some obvious problems. As it includes only principal repayments, it can give a misleading depiction of relative indebtedness levels, and can give countries an incentive to distort debt issuance to hit simple staistical targets. As it is undiscounted, it can be a misleading indicator of the value of the debt to investors and the burden of repaying the debt to the country. In this paper, we use theory to guide us in the construction of several new measures of the stock of external sovereign debt for 150 countries from 1980 to 2006. We use our measures to bound the welfare gains from debt relief.

Suggested Citation

  • Mark Wright & Christine Richmond & Daniel Dias, 2012. "On The Stock of External Sovereign Debt," 2012 Meeting Papers 490, Society for Economic Dynamics.
  • Handle: RePEc:red:sed012:490
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    File URL: https://economicdynamics.org/meetpapers/2012/paper_490.pdf
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    References listed on IDEAS

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    1. Hatchondo, Juan Carlos & Martinez, Leonardo, 2009. "Long-duration bonds and sovereign defaults," Journal of International Economics, Elsevier, vol. 79(1), pages 117-125, September.
    2. Satyajit Chatterjee & Burcu Eyigungor, 2012. "Maturity, Indebtedness, and Default Risk," American Economic Review, American Economic Association, vol. 102(6), pages 2674-2699, October.
    3. Cristina Arellano, 2008. "Default Risk and Income Fluctuations in Emerging Economies," American Economic Review, American Economic Association, vol. 98(3), pages 690-712, June.
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "The Forgotten History of Domestic Debt," Economic Journal, Royal Economic Society, vol. 121(552), pages 319-350, May.
    5. 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.
    6. Yue, Vivian Z., 2010. "Sovereign default and debt renegotiation," Journal of International Economics, Elsevier, vol. 80(2), pages 176-187, March.
    7. Aguiar, Mark & Gopinath, Gita, 2006. "Defaultable debt, interest rates and the current account," Journal of International Economics, Elsevier, vol. 69(1), pages 64-83, June.
    8. William Easterly, 1999. "When is fiscal adjustment an illusion?," Economic Policy, CEPR;CES;MSH, vol. 14(28), pages 55-86, April.
    9. 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 1088-1097, December.
    10. Piga, Gustavo, 2001. "Do Governments Use Financial Derivatives Appropriately? Evidence from Sovereign Borrowers in Developed Economies," International Finance, Wiley Blackwell, vol. 4(2), pages 189-219, Summer.
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    Cited by:

    1. Dias, Daniel A. & Richmond, Christine & Wright, Mark L.J., 2014. "The stock of external sovereign debt: Can we take the data at ‘face value’?," Journal of International Economics, Elsevier, vol. 94(1), pages 1-17.
    2. S Coleman & K Sirichand, 2015. "Investigating Multiple Changes in Persistence in International Yields," Economic Issues Journal Articles, Economic Issues, vol. 20(1), pages 65-90, March.

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