SOVEREIGN DEBT RELIEF AND ITS AFTERMATH Reinhart, Carmen M.; Trebesch, Christoph
Journal of the European Economic Association,
February 2016, Letnik:
14, Številka:
1
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This paper studies sovereign debt relief in a long-term perspective. We quantify the relief achieved through default and restructuring in two distinct samples: 1920-1939, focusing on the defaults on ...official (government to government) debt in advanced economies after World War I; and 1978-2010, focusing on emerging market debt crises with private external creditors. Debt relief was substantial in both eras, averaging 21% of GDP in the 1930s and 16% of GDP in recent decades. We then analyze the aftermath of debt relief and conduct a difference-in-differences analysis around the synchronous war debt defaults of 1934 and the Baker and Brady initiatives of the 1980s/1990s. The economic landscape of debtor countries improves significantly after debt relief operations, but only if these involve debt write-offs. Softer forms of debt relief, such as maturity extensions and interest rate reductions, are not generally followed by higher economic growth or improved credit ratings.
A sketch of the International Monetary Fund's 70-year history reveals an institution that has reinvented itself over time along multiple dimensions. This history is primarily consistent with a ..."demand driven" theory of institutional change, as the needs of its clients and the type of crisis changed substantially over time. Some deceptively "new" IMF activities are not entirely new. Before emerging market economies dominated IMF programs, advanced economies were its earliest (and largest) clients through the 1970s. While currency problems were the dominant trigger of IMF involvement in the earlier decades, banking crises and sovereign defaults became the key focus after the 1980s. Around this time, the IMF shifted from providing relatively brief (and comparatively modest) balance-of-payments support in the era of fixed exchange rates to coping with more chronic debt sustainability problems that emerged with force in the developing economies and have now migrated to advanced economies. As a consequence, the IMF has engaged in "serial lending," with programs often spanning decades. Moreover, the institution faces a growing risk of lending into insolvency; this has been most evident in Greece since 2010. We conclude with the observation that the IMF's role as an international lender of last resort is endangered.
The historical frequency of banking crises is similar in advanced and developing countries, with quantitative parallels in both the run-ups and the aftermath. We establish these regularities using a ...dataset spanning from the early 1800s to the present. Banking crises weaken fiscal positions, with government revenues invariably contracting. Three years after a crisis central government debt increases by about 86%. The fiscal burden of banking crisis extends beyond the cost of the bailouts. We find that systemic banking crises are typically preceded by asset price bubbles, large capital inflows and credit booms, in rich and poor countries alike.
Dealing with debt Reinhart, Carmen M.; Reinhart, Vincent; Rogoff, Kenneth
Journal of international economics,
07/2015, Letnik:
96, Številka:
Supp.1
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This paper explores the menu of options for renormalizing public debt levels relative to nominal activity in the long run, should governments eventually decide to do so. Although debt ratios may need ...to rise further in some cases, a vision of longer-term options is key to weighing alternative medium-term stabilization strategies. Orthodox ones, the standard fare of officialdom, include enhancing growth, running primary budget surpluses, and privatizing government assets. Heterodox polices include restructuring debt contracts, generating unexpected inflation, taxing wealth, and repressing private finance. Advanced countries have relied far more on heterodox approaches than many observers choose to remember.
The Forgotten History of Domestic Debt Reinhart, Carmen M.; Rogoff, Kenneth S.
The Economic journal (London),
20/May , Letnik:
121, Številka:
552
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The literature on domestic debt default is sparse, as are the data. We compile a database on public debt that spans the nineteenth century to 2010. Our findings are as follows. First, domestic debt ...accounts for almost two-thirds of public debt. Second, the data help to explain the puzzle of why countries default on external debts at seemingly low debt thresholds. Third, domestic debt (which is often larger than the monetary base in the run-up to high inflation) has largely been ignored in the inflation literature. Last, the view that domestic residents are junior to external creditors does not find broad support.
We develop a novel system of reclassifying historical exchange rate regimes. One key difference between our study and previous classifications is that we employ monthly data on market-determined ...parallel exchange rates going back to 1946 for 153 countries. Our approach differs from the IMF official classification (which we show to be only a little better than random); it also differs radically from all previous attempts at historical reclassification. Our classification points to a rethinking of economic performance under alternative exchange rate regimes. Indeed, the breakup of Bretton Woods had less impact on exchange rate regimes than is popularly believed.
•New methodology for detecting transaction use of crypto in off-chain exchanges.•Demonstrates that large fraction of trades represent international capital movements.•Data covers several hundred ...million transactions for over 160 countries.•First study to focus on exchanges where roughly 90% of crypto trades take place.
This paper employs high frequency transactions data on the world's two oldest and most extensive centralized peer-to-peer Bitcoin markets, enabling trade in the currencies of more than 160 countries. We develop an algorithm that allows us, with high probability, to detect “crypto vehicle transactions” in which crypto currency is used to move capital across borders, and/or to exchange one fiat currency for another. The data suggest that the use of Bitcoin has become an increasingly important channel to receive remittances and evade capital controls in emerging markets. Two event studies on Venezuela and Argentina provide supporting evidence.
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