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Sovereign Debt Restructuring: Delays in Renegotiation and Risk Averse Creditors

Asonuma, Tamon and Joo, Hyungseok Sovereign Debt Restructuring: Delays in Renegotiation and Risk Averse Creditors Journal of the European Economic Association.

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Abstract

Foreign creditors’ business cycles influence both the process and the outcome of sovereign debt restructurings. We compile two datasets on creditor committees and chairs and on creditor business and financial cycles at the restructurings, and find that when creditors experience high GDP growth, restructurings are delayed and settled with smaller haircuts. To rationalize these stylized facts, we develop a theoretical model of sovereign debt with multi-round renegotiations between a risk averse sovereign debtor and a risk averse creditor. The quantitative analysis of the model shows that high creditor income results in both longer delays in renegotiations and smaller haircuts. Our theoretical predictions are supported by data. (JEL: F34, F41, H63)

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
NameEmailORCID
Asonuma, Tamon
Joo, Hyungseokh.joo@surrey.ac.uk
Related URLs :
Depositing User : Diane Maxfield
Date Deposited : 12 Nov 2019 16:55
Last Modified : 07 Jan 2020 11:54
URI: http://epubs.surrey.ac.uk/id/eprint/853117

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