Supersanctions and sovereign debt repayment

Kris James Mitchener and Marc D. Weidenmier

Journal of International Money and Finance, 2010, vol. 29, issue 1, 19-36

Abstract: What might happen if a third-party entity had the power to implement fiscal reforms and/or punish sovereign debt defaulters? In contrast to recent history, extreme sanctions such as gunboat diplomacy and "fiscal house arrest" were used to punish debt defaulters during the period 1870-1913. We find that, after a "supersanction" was imposed, a country improved its fiscal discipline. As a result, ex ante default probabilities on new issues fell dramatically and the country spent no additional time in default. Our results suggest some type of external fiscal or monetary control may be effective in imposing discipline on serial debt defaulters.

Keywords: Sovereign; debt; Sovereign; default; Sanctions; Gunboat; diplomacy; Reputation (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (60)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261-5606(08)00173-3
Full text for ScienceDirect subscribers only

Related works:
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:eee:jimfin:v:29:y:2010:i:1:p:19-36

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().