Serial defaults, serial profits: Returns to sovereign lending in Habsburg Spain, 1566-1600
Mauricio Drelichman and
Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
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. © 2010 Elsevier Inc. All rights reserved.
Keywords: Sovereign debt; Serial default; Rate of return; Profitability; Spain (search for similar items in EconPapers)
JEL-codes: N23 F34 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed
Downloads: (external link)
https://econ-papers.upf.edu/papers/1262.pdf Whole Paper (application/pdf)
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)
Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1262
Access Statistics for this paper
More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ().