Arbeitspapier
Resolving Sovereign Debt Crises: The Role of Political Risk
Sovereign defaults are bad news for investors and debtor countries, in particular if a default becomes messy and protracted. Why are some debt crises resolved quickly, in a matter of months, while others take many years to settle? This paper studies the duration of sovereign debt crises based on a new dataset and case study archive on debt renegotiations between governments and foreign banks and bondholders. Using Cox proportional hazard models, I find that domestic political instability (‘political risk’) is a significant predictor of negotiation delays, after controlling for macroeconomic conditions. Government crises, resignations, and street protests are particularly disruptive for a quick settlement process. Overall, the evidence suggests that debtor countries often lack the political ability to resolve a debt crisis. Governments in turmoil are unlikely to exit a default quickly.
- Sprache
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Englisch
- Erschienen in
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Series: CESifo Working Paper ; No. 7161
- Klassifikation
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Wirtschaft
International Lending and Debt Problems
International Conflicts; Negotiations; Sanctions
National Debt; Debt Management; Sovereign Debt
- Thema
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sovereign default
crisis resolution
political economy
- Ereignis
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Geistige Schöpfung
- (wer)
-
Trebesch, Christoph
- Ereignis
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Veröffentlichung
- (wer)
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Center for Economic Studies and ifo Institute (CESifo)
- (wo)
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Munich
- (wann)
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2018
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:45 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Trebesch, Christoph
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2018