Sovereign defaults: The price of haircuts

Juan J. Cruces and Christoph Trebesch

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: A main puzzle in the sovereign debt literature is that defaults have only minor effects on subsequent borrowing costs and access to credit. This paper comes to a different conclusion. We construct the first complete database of investor losses (\"haircuts\") in all restructurings with foreign banks and bondholders from 1970 until 2010, covering 180 cases in 68 countries. We then show that restructurings involving higher haircuts are associated with significantly higher subsequent bond yield spreads and longer periods of capital market exclusion. The results cast doubt on the widespread belief that credit markets \"forgive and forget.\".

Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (386)

Published in American Economic Journal: Macroeconomics 3 5(2013): pp. 85-117

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Sovereign Defaults: The Price of Haircuts (2013)
Working Paper: Sovereign Defaults: The Price of Haircuts (2011)
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:muenar:20036

Access Statistics for this paper

More papers in Munich Reprints 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 ().