Sovereign Debt Restructurings: Preemptive or Post-Default

Tamon Asonuma and Christoph Trebesch

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: 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.

Keywords: Sovereign Debt; Default; Debt Restructuring; Crisis Resolution (search for similar items in EconPapers)
JEL-codes: F34 F41 H63 (search for similar items in EconPapers)
Date: 2015-11-07
New Economics Papers: this item is included in nep-cba and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://epub.ub.uni-muenchen.de/26563/1/asomuma_trebesch.pdf (application/pdf)

Related works:
Journal Article: SOVEREIGN DEBT RESTRUCTURINGS: PREEMPTIVE OR POST-DEFAULT (2016)
Journal Article: Sovereign Debt Restructurings: Preemptive or Post-Default (2016)
Working Paper: Sovereign Debt Restructurings: Preemptive or Post-Default (2016)
Working Paper: Sovereign Debt Restructurings: Preemptive or Post-Default (2015)
Working Paper: Sovereign Debt Restructurings: Preemptive or Post-Default (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:26563

Access Statistics for this paper

More papers in Discussion Papers in Economics from University of Munich, Department of Economics Ludwigstr. 28, 80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg ().