Sovereign debt guarantees and default: Lessons from the UK and Ireland, 1920–1938

Nathan Foley-Fisher and Eoin McLaughlin

European Economic Review, 2016, vol. 87, issue C, 272-286

Abstract: We study the daily yields on Irish land bonds listed on the Dublin Stock Exchange during the years 1920–1938. We exploit Irish events during the period and structural differences in land bonds to tease out a measure of investors׳ credibility in a UK sovereign guarantee. Using Ireland׳s default on intergovernmental payments in 1932, we find a premium of about 43 basis points associated with uncertainty about the UK government guarantee. We discuss the economic and political forces behind the Irish and UK governments׳ decisions pertaining to the default. Our finding has implications for modern-day proposals to issue jointly-guaranteed sovereign debt.

Keywords: Irish land bonds; Dublin Stock Exchange; Sovereign default; Debt guarantees (search for similar items in EconPapers)
JEL-codes: G15 N23 N24 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:87:y:2016:i:c:p:272-286

DOI: 10.1016/j.euroecorev.2016.05.010

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