Serial Defaults, Serial Profits: Returns to Sovereign Lending in Habsburg Spain, 1566-1600

Mauricio Drelichman and Hans-Joachim Voth

Economics working papers from Vancouver School of Economics

Abstract: Philip II of Spain accumulated debts equivalent to 60% of GDP. He also defaulted four times on his short-term loans, thus becoming the first serial defaulter in history. Contrary to a common view in the literature, we show that lending to the king was profitable even under worst-case scenario assumptions. Lenders maintained long-term relationships with the crown. Losses sustained during defaults were more than compensated by profits in normal times. Defaults were not catastrophic events. In effect, short-term lending acted as an insurance mechanism, allowing the king to reduce his payments in harsh times in exchange for paying a premium in tranquil periods.

Keywords: sovereign debt; serial default; rate of return; profitability; Spain (search for similar items in EconPapers)
Pages: 36 pages
Date: 2010-04-01, Revised 2011-07-04
New Economics Papers: this item is included in nep-his and nep-ifn
References: Add references at CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
http://mauricio.econ.ubc.ca/pdfs/Serial_Profits.pdf

Related works:
Journal Article: Serial defaults, serial profits: Returns to sovereign lending in Habsburg Spain, 1566-1600 (2011)
Working Paper: Serial defaults, serial profits: Returns to sovereign lending in Habsburg Spain, 1566-1600 (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:ubc:bricol:mauricio_drelichman-2010-12

Access Statistics for this paper

More papers in Economics working papers from Vancouver School of Economics
Bibliographic data for series maintained by Maureen Chin ().