Sovereign debt restructurings: Preemptive or post-default

Arbeitspapier

Sovereign debt restructurings can be implemented preemptively - prior to a payment default. We code a comprehensive new dataset and find that preemptive restructurings (i) are frequent (38% of all deals 1978-2010), (ii) have lower haircuts, (iii) are quicker to negotiate, and (iv) see lower output losses. To rationalize these stylized facts, we build a quantitative sovereign debt model that incorporates preemptive and post-default renegotiations. The model improves the fit with the data and explains the sovereign's optimal choice: preemptive restructurings occur when default risk is high ex-ante, while defaults occur after unexpected bad shocks. Empirical evidence supports these predictions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Munich Discussion Paper ; No. 2015-18

Classification and Topics

• Classification: Wirtschaft ; International Lending and Debt Problems ; Open Economy Macroeconomics ; National Debt; Debt Management; Sovereign Debt
• Subject: Sovereign Debt ; Default ; Debt Restructuring ; Crisis Resolution

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Asonuma, Tamon ; Trebesch, Christoph
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät
• (where): München
• (when): 2015

Further information

• DOI: doi:10.5282/ubm/epub.26563
• Handle: http://hdl.handle.net/10419/142720
• URN: urn:nbn:de:bvb:19-epub-26563-7
• Last update: 10.03.2025, 11:42 AM CET