The timing of sovereign defaults over electoral terms

Nathan Foley-Fisher

No 1047, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: I construct a database that maps the timing of sovereign default decisions into elected politicians' terms of office, that provides an empirical means of investigating political economy theories of sovereign default. I find no robust patterns in the timing of default decisions over terms of office. I also find no evidence in support of the political reputation theory of sovereign debt repayment. Finally, there is some tentative evidence that elected leaders who default are also those more likely to be re-elected. Motivated by anecdotal evidence, I use a stylised model of political leaders with career concerns to demonstrate how this can occur when politicians care about re-election.

Date: 2012
New Economics Papers: this item is included in nep-pol
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1047

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