Why are there Serial Defaulters? Evidence from Constitutions
Presidential democracies were 4.9 times more likely to default on external debts between 1976 and 2000 than parliamentary democracies. This paper argues that the explanation to the pattern of serial defaults among a number of sovereign borrowers lies in their constitutions. Ceteris paribus, parliamentary democracies are less likely to default on their liabilities as the confidence requirement creates a credible link between economic policies and the political survival of the executive. This link tends to strengthen the repayment commitment when politicians are opportunistic. I show that this effect is large and statistically significant in the contemporary world even when comparison is restricted to countries that are twins in terms of colonial origin, geography and economic variables. Moreover, the result persists if OECD or Latin American democracies are excluded from the sample. Since the form of government of a country is typically chosen at the time of independence and highly persistent over time, constitutions can explain why debt policies in developing countries are related to individual histories
|Date of creation:||2006|
|Contact details of provider:|| Postal: CV4 7AL COVENTRY|
Phone: +44 (0) 2476 523202
Fax: +44 (0) 2476 523032
Web page: http://www2.warwick.ac.uk/fac/soc/economics/
More information through EDIRC
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.:
- -, 2003. "Global economic developments, 2001-2003," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 27560, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
- anonymous, 2003. "New nickels to debut in late 2003," Financial Update, Federal Reserve Bank of Atlanta, issue Q 3.
- AfDB AfDB, . "African Development Report 2003," African Development Report, African Development Bank, number 20 edited by Adeleke Oluwole Salami.
- Anonymous, 2003. "MINNESOTA APPLIED ECONOMIST 708, Winter 2003," Minnesota Applied Economist/Minnesota Agricultural Economist 13213, University of Minnesota, Department of Applied Economics.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2004.
"Serial Default and the "Paradox" of Rich-to-Poor Capital Flows,"
American Economic Review,
American Economic Association, vol. 94(2), pages 53-58, May.
- Reinhart, Carmen & Rogoff, Kenneth, 2004. "Serial default and the “paradox” of rich to poor capital flows," MPRA Paper 13997, University Library of Munich, Germany.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "Serial Default and the "Paradox" of Rich to Poor Capital Flows," NBER Working Papers 10296, National Bureau of Economic Research, Inc.
- Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, 09.
- Glaeser, Edward L. & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2004. "Do Institutions Cause Growth?," Scholarly Articles 27867242, Harvard University Department of Economics.
- Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," NBER Working Papers 10568, National Bureau of Economic Research, Inc.
- ., 2003. "Enquête financière – Premier trimestre 2003," Bulletin de la Banque de France, Banque de France, issue 113, pages 51-57.
- North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
- N/A, 2003. "Abram Bergson (1914â€“2003) in Memoriam," The American Economist, , vol. 47(2), pages 3-5, October.
- Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
- Persson, Torsten & Tabellini, Guido, 2002. "Do constitutions cause large governments? Quasi-experimental evidence," European Economic Review, Elsevier, vol. 46(4-5), pages 908-918, May.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "Serial Default and the "Paradox" of Rich-to-Poor Capital Flows," American Economic Review, American Economic Association, vol. 94(2), pages 53-58, May.
- Reinhart, Carmen M. & Rogoff, Kenneth S., 2004. "Serial Default and the â€œParadoxâ€ of Rich-to-Poor Capital Flows," Scholarly Articles 11129182, Harvard University Department of Economics.
- Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
- Anonymous, 2003. "Minnesota Applied Economist 710, Fall 2003," Minnesota Applied Economist/Minnesota Agricultural Economist 13188, University of Minnesota, Department of Applied Economics. Full references (including those not matched with items on IDEAS)