Sovereign Defaults at Home and Abroad

Aitor Erce, Enrico Mallucci and Mattia Osvaldo Picarelli

No 18739, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We systematically compare sovereign defaults on debt issued externally and domestically. Defaults at home and abroad are equally frequent, and governments often default selectively. Compared to domestic defaults, external defaults are larger and take longer to resolve. Both external and domestic defaults are often resolved through maturity extensions and coupon reductions. Face value reductions are infrequent, especially as part of domestic restructurings. Yet, domestic defaults are more punitive, as they are associated with larger creditor losses. We also document that domestic and external sovereign defaults occur in markedly different macro-financial, political and geo-economic environments. Our stylized facts inform a growing theoretical literature concerned with sovereign defaults in the presence of domestic debt markets.

Keywords: Public debt; Sovereign default; Domestic markets; Stylized facts; Theory (search for similar items in EconPapers)
JEL-codes: E62 E65 F34 G01 H12 H63 K00 K41 (search for similar items in EconPapers)
Date: 2024-01
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Working Paper: Sovereign defaults at home and abroad (2024)
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