Sovereign Debt Relief and Its Aftermath

Carmen Reinhart and Christoph Trebesch

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: This paper studies sovereign debt relief in a long-term perspective. We quantify the relief achieved through default and restructuring in two distinct samples: 1920-1939, focusing on the defaults on official (government to government) debt in advanced economies after World War I; and 1978-2010, focusing on emerging market debt crises with private external creditors. Debt relief was substantial in both eras averaging 21% of GDP in the 1930s and 16% of GDP in recent decades. We analyze the aftermath of debt relief and conduct a difference-in-differences analysis around the synchronous war debt defaults of 1934 and the Baker and Brady initiatives of the 1980s/1990s. The economic landscape of debtor countries improves significantly after debt relief operations, but only if these involve debt write-offs. Softer forms of debt relief, such as maturity extensions and interest rate reductions, are not generally followed by higher economic growth or improved credit ratings.

JEL-codes: E60 F30 H60 N00 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-his, nep-mac and nep-opm
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Citations: View citations in EconPapers (19)

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https://research.hks.harvard.edu/publications/work ... ?PubId=9757&type=WPN

Related works:
Journal Article: SOVEREIGN DEBT RELIEF AND ITS AFTERMATH (2016)
Journal Article: Sovereign Debt Relief and Its Aftermath (2016)
Working Paper: Sovereign Debt Relief and Its Aftermath (2016)
Working Paper: Sovereign Debt Relief and its Aftermath (2015)
Working Paper: A Distant Mirror of Debt, Default, and Relief (2014)
Working Paper: A Distant Mirror of Debt, Default, and Relief (2014)
Working Paper: A Distant Mirror of Debt, Default, and Relief (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:harjfk:rwp15-028

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