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Sovereign Debt Restructuring: Delays in Renegotiation and Risk Averse Creditors

Asonuma, Tamon and Joo, Hyungseok (2020) Sovereign Debt Restructuring: Delays in Renegotiation and Risk Averse Creditors Journal of the European Economic Association.

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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 :
Asonuma, Tamon
Date : 18 March 2020
DOI : 10.1093/jeea/jvz080
Copyright Disclaimer : © The Author(s) 2020. Published by Oxford University Press on behalf of European Economic Association.
Uncontrolled Keywords : F34 - International Lending and Debt Problems F41 - Open Economy Macroeconomics H63 - Debt; Debt Management; Sovereign Debt
Related URLs :
Depositing User : Diane Maxfield
Date Deposited : 12 Nov 2019 16:55
Last Modified : 25 Jun 2020 10:26

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