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Repatriation of Debt in the Euro Crisis: Evidence for the Secondary Market Theory

Filippo Brutti () and Philip Ulrich Sauré
Authors registered in the RePEc Author Service: Philip Ulrich Sauré ()

No 2014-03, Working Papers from Swiss National Bank

Abstract: The Euro Crisis has stopped the process of the European financial integration and triggered a strong repatriation of debt from foreign to domestic investors. We investigate this empirical pattern in light of competing theories of cross-border portfolio allocation. Three empirical regularities stand out: i) repatriation of debt occurred mainly in crisis countries; ii) repatriation affected mainly public debt; iii) public debt of crisis countries was reallocated to politically influential countries within the Euro Area. Standard theories are in line with pattern (i) at best. We argue that the full picture constitutes evidence for the "secondary market theory" of sovereign debt.

Keywords: Debt Repatriation; Sovereign Risk; Secondary Markets; Euro Crisis; Portfolio Home-Bias (search for similar items in EconPapers)
JEL-codes: F34 F36 G01 G11 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-opm
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21) Track citations by RSS feed

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