Recent events have shown that sovereigns, just like banks, can be subject to runs, highlighting the importance of the investor base for their liabilities. This paper proposes a methodology for ...compiling internationally comparable estimates of investor holdings of sovereign debt. Based on this methodology, it introduces a dataset for 24 major advanced economies that can be used to track US$42 trillion of sovereign debt holdings on a quarterly basis over 2004-11. While recent outflows from euro periphery countries have received wide attention, most sovereign borrowers have continued to increase reliance on foreign investors. This may have helped reduce borrowing costs, but it can imply higher refinancing risks going forward. Meanwhile, advanced economy banks' exposure to their own government debt has begun to increase across the board after the global financial crisis, strengthening sovereign-bank linkages. In light of these risks, the paper proposes a framework-sovereign funding shock scenarios (FSS)-to conduct forward-looking analysis to assess sovereigns' vulnerability to sudden investor outflows, which can be used along with standard debt sustainability analyses (DSA). It also introduces two risk indices-investor base risk index (IRI) and foreign investor position index (FIPI)-to assess sovereigns' vulnerability to shifts in investor behavior.
States of credit Stasavage, David
2011., 20110705, 2011, 2011-07-05, Letnik:
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States of Credit provides the first comprehensive look at the joint development of representative assemblies and public borrowing in Europe during the medieval and early modern eras. In this ...pioneering book, David Stasavage argues that unique advances in political representation allowed certain European states to gain early and advantageous access to credit, but the emergence of an active form of political representation itself depended on two underlying factors: compact geography and a strong mercantile presence.
Why do lenders time and again loan money to sovereign borrowers who promptly go bankrupt? When can this type of lending work? As the United States and many European nations struggle with mountains of ...debt, historical precedents can offer valuable insights.Lending to the Borrower from Helllooks at one famous case--the debts and defaults of Philip II of Spain. Ruling over one of the largest and most powerful empires in history, King Philip defaulted four times. Yet he never lost access to capital markets and could borrow again within a year or two of each default. Exploring the shrewd reasoning of the lenders who continued to offer money, Mauricio Drelichman and Hans-Joachim Voth analyze the lessons from this important historical example.
Using detailed new evidence collected from sixteenth-century archives, Drelichman and Voth examine the incentives and returns of lenders. They provide powerful evidence that in the right situations, lenders not only survive despite defaults--they thrive. Drelichman and Voth also demonstrate that debt markets cope well, despite massive fluctuations in expenditure and revenue, when lending functions like insurance. The authors unearth unique sixteenth-century loan contracts that offered highly effective risk sharing between the king and his lenders, with payment obligations reduced in bad times.
A fascinating story of finance and empire,Lending to the Borrower from Helloffers an intelligent model for keeping economies safe in times of sovereign debt crises and defaults.
This volume offers two important contributions to the literature on sovereign debt. First, it provides a unique genealogy of debt collection practices in terms of their availability, acceptability ...and efficacy. We argue that creditors’ tactics and methods to enforce debt repayment emerged and solidified to a large extent in relation to the threads of colonial history, from the building of empires to the decolonisation era. Second, this volume reflects critically on the relevance of neo-colonial interpretations in recent cases of sovereign debt disputes
How does one package and sell confidence in the stability of a
nation riven by civil strife? This was the question that loomed
before the Philadelphia financial house of Jay Cooke &
Company, ...entrusted by the US government with an unprecedented
sale of bonds to finance the Union war effort in the early days of
the American Civil War. How the government and its agents marketed
these bonds revealed a version of the war the public was willing to
buy and buy into, based not just in the full faith and credit of
the United States but also in the success of its armies and its
long-term vision for open markets. From Maine to California, and in
foreign halls of power and economic influence, thousands of agents
were deployed to sell a clear message: Union victory was unleashing
the American economy itself. This fascinating work of financial and
political history during the Civil War era shows how the marketing
and sale of bonds crossed the Atlantic to Europe and beyond,
helping ensure foreign countries' vested interest in the Union's
success. Indeed, David K. Thomson demonstrates how Europe, and
ultimately all corners of the globe, grew deeply interdependent on
American finance during, and in the immediate aftermath of, the
American Civil War.
This book develops new theory about the link between debt and democracy and applies it to a classic historical comparison: Great Britain in the eighteenth century which had strong representative ...institutions and sound public finance vs. ancient regime France, which had neither. The book argues that whether representative institutions improve commitment depends on the opportunities for government creditors to form new coalitions with other social groups, more likely to occur when a society is divided across multiple political cleavages. It then presents historical evidence to show that improved access to finance in Great Britain after 1688 had as much to do with the development of the Whig Party as with constitutional changes. In France, it is suggested that the balance of partisan forces made it unlikely that an early adoption of 'English-style' institutions would have improved credibility.
This paper provides a comprehensive survey of pertinent issues on sovereign debt restructurings, based on a newly constructed database. This is the first complete dataset of sovereign restructuring ...cases, covering the six decades from 1950-2010; it includes 186 debt exchanges with foreign banks and bondholders, and 447 bilateral debt agreements with the Paris Club. We present new stylized facts on the outcome and process of debt restructurings, including on the size of haircuts, creditor participation, and legal aspects. In addition, the paper summarizes the relevant empirical literature, analyzes recent restructuring episodes, and discusses ongoing debates on crisis resolution mechanisms, credit default swaps, and the role of collective action clauses.
How does cooperation emerge in a condition of international anarchy? Michael Tomz sheds new light on this fundamental question through a study of international debt across three centuries. Tomz ...develops a reputational theory of cooperation between sovereign governments and foreign investors. He explains how governments acquire reputations in the eyes of investors, and argues that concerns about reputation sustain international lending and repayment.
Should South Africa be responsible for apartheid-era debt? Should Iraq be tied to Saddam Hussein's excesses? Odette Lienau shows that sovereign debt continuity--the rule that nations must repay loans ...even after a regime change--relies on absolutist ideas, and explains why the practice is not essential for functioning capital markets.
International law on sovereign defaults is underdeveloped because States have largely refrained from adjudicating disputes arising out of public debt. The looming new wave of sovereign defaults is ...likely to shift dispute resolution away from national courts to international tribunals and transform the current regime for restructuring sovereign debt. Michael Waibel assesses how international tribunals balance creditor claims and sovereign capacity to pay across time. The history of adjudicating sovereign defaults internationally over the last 150 years offers a rich repository of experience for future cases: US state defaults, quasi-receiverships in the Dominican Republic and Ottoman Empire, the Venezuela Preferential Case, the Soviet repudiation in 1917, the League of Nations, the World War Foreign Debt Commission, Germany's 30-year restructuring after 1918 and ICSID arbitration on Argentina's default in 2001. The remarkable continuity in international practice and jurisprudence suggests avenues for building durable institutions capable of resolving future sovereign defaults.
