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Risk Sharing with the Monarch: Contingent Debt and Excusable Defaults in the Age of Philip II, 1556-1598

Mauricio Drelichman and Hans-Joachim Voth

Economics working papers from Vancouver School of Economics

Abstract: Contingent sovereign debt can create important welfare gains. Nonetheless, there is almost no issuance today. Using hand-collected archival data, we examine the first known case of large-scale use of state-contingent sovereign debt in history. Philip II of Spain entered into hundreds of contracts whose value and due date depended on verifiable, exogenous events such as the arrival of silver fleets. We show that this allowed for effective risk-sharing between the king and his bankers. The data also strongly suggest that the defaults that occurred were excusable – they were simply contingencies over which Crown and bankers had not contracted previously.

Keywords: Sovereign Debt; Excusable Default; Rollover Crisis; Spain (search for similar items in EconPapers)
Pages: 44 pages
Date: 2011-07-04, Revised 2012-06-06
New Economics Papers: this item is included in nep-his
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http://mauricio.econ.ubc.ca/pdfs/risk_sharing.pdf

Related works:
Journal Article: Risk sharing with the monarch: contingent debt and excusable defaults in the age of Philip II, 1556–1598 (2015) Downloads
Working Paper: Risk sharing with the monarch: contingent debt and excusable defaults in the age of Philip II, 1556–1598 (2014) Downloads
Working Paper: Risk Sharing with the Monarch: Contigent Debt and Excusable Defaults in the Age of Philip II, 1556-1598 (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ubc:bricol:mauricio_drelichman-2011-14

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