In this study, using an ex ante measure, we examine the convergence patterns in sovereign defaults among 101 developing countries for the period from 1990 to 2015. We employ the club convergence ...algorithm to determine convergence paths across countries and examine the role of institutions in shaping the observed convergence patterns. The merging of clubs reveals three distinct convergent sub‐clubs. Countries in each of these sub‐clubs tend to exhibit a similar pattern of long‐run convergence in cases of sovereign debt default. Countries with better institutions are less likely to belong to a club with greater risks of sovereign defaults by 7% points. Unlike trade openness, levels of external debt, inflation and current account balance increase the probability of default in these economies.
Military expenditures are often funded by debt, and sovereign borrowers are more likely to renege on debt-service obligations if they lose a war than if they win one or if peace prevails. This makes ...expected debt service costlier in peace, which can affect both crisis bargaining and war termination. I analyze a complete-information model where players negotiate in the shadow of power, whose distribution depends on their mobilization levels, which can be funded partially by borrowing. I show that players can incur debts that are unsustainable in peace because the opponent is unwilling to grant the concessions necessary to service them without fighting. This explanation for war is not driven by commitment problems or informational asymmetries but by the debt-induced inefficiency of peace relative to war. War results from actions that eliminate the bargaining range rather than from inability to locate mutually acceptable deals in that range.
First came the financial and debt crisis in Greece, then government financing difficulties and rescue programs in Ireland in 2010 and Portugal in 2011. Before long, Italy and Spain were engulfed by ...financial contagion as well. Finally in 2012, the European Central Bank pledged to do "whatever it takes" to preserve the euro area with purchases of government bonds, a step that achieved impressive results, according to William R. Cline in this important new book. One of the world's leading experts on fiscal and debt issues, Cline mobilizes meticulously researched and forceful arguments to trace the history of the euro area debt crisis and makes projections of future debt sustainability. He argues that euro area leaders made the right decision to keep the euro from breaking apart but warns against complacency about the future. Cline contends that troubled European economies should continue their fiscal consolidation but that further debt restructurings for most countries are not called for. Greece is a special case and may need some further debt relief contingent on continued progress on fiscal and structural reform, however. In this landmark study, Cline offers a detailed analysis of the mistakes, successes, and options for Europe as it struggles to overcome its worst economic disaster since World War II.
This edition of the OECD Sovereign Borrowing Outlook reviews developments in response to the COVID-19 pandemic for government borrowing needs, funding conditions and funding strategies in the OECD ...area. It discusses the implications of the COVID-19 crisis on sovereign refinancing risk, and how to identify, measure and mitigate refinancing risk in light of country experiences. It then examines debt issuance trends for government securities in emerging market and developing economies in recent years, and presents novel insights on the impact of the COVID-19 pandemic on issuance conditions in these economies.
Sustainability of Public Debt Neck, Reinhard; Sturm, Jan-Egbert; Bohn, Henning ...
The MIT Press eBooks,
05/2008, Letnik:
1
eBook, Book
Odprti dostop
Theoretical and empirical perspectives on how fiscal policies in Europe and the United States can avoid government bankruptcy.
In recent decades, governments have built up substantial public debt, ...which is often accompanied by a growing public sector and fiscal policies that neglect long-term considerations. The contributors to this CESifo volume consider whether the development of public debt in the United States and six EU countries is sustainable—that is, whether fiscal policies in these countries can be continued without creating the potential for government bankruptcy. The sustainability of public debt presents a challenge not only to public policy design but also to economic theory. This collection is the first book-length analysis of the theoretical foundations of public debt sustainability concepts and their application to the empirical study of actual budgetary policies. Conditions for public debt sustainability are derived and applied to various institutional environments. Country studies cover the United States, Italy, the Netherlands, Austria, Denmark, the United Kingdom, and Switzerland, with special emphasis in the EU chapters on the fiscal criteria for entrance into the European Monetary Union and the Stability and Growth Pact. The contributors find that in most countries, fiscal policy turns out to be sustainable in the long run and that all countries (with the possible exception of Italy) were able to return to a sustainable path after a period of unsustainability.
Contributors
Torben M. Andersen, Roel M. W. J. Beetsma, Henning Bohn, Marco Buti, Sylvester Eijffinger, Lars P. Feld, Daniele Franco, Emma Galli, Olaf de Groot, Gottfried Haber, Jakob de Haan, Andrew Hughes Hallett, Svend E. Hougaard Jensen, Gebhard Kirchgässner, Reinhard Neck, Fabio Padovano, Lars Haagen Pedersen, Jan-Egbert Sturm, Koen Vermeylen
Rocío Zambrana uses the current political-economic moment in Puerto Rico to outline how debt functions as both an apparatus that strengthens neoliberalism and the island's colonial relation to the ...United States.
In dealing with the problem of determining whether a debt should be a marital community debt and how such a debt should be collected, judges may have different value orientations regarding the ...tradeoff between the protection of marriage and family and the protection of the creditors, which needs to be studied based on empirical evidence. After the Judicial Interpretations 2018 No. 2 (Fa Shi 2018 No. 2) was enacted, we analyzed 863 judgments and motions of the Supreme People’s Court of the People’s Republic of China (PRC) and the high people’s courts, and found that under the framework of existing normative regime, judges can still reach different value judgments based on different interpretative techniques. Judges differed in interpreting the terms of “common intent,” “family daily needs,” “common livelihood,” and “joint production and operation,” and they applied various debt collection rules. These facts indicate that sometimes judges have a complex value balancing process in marginal cases, and they have made different value judgment through extending or confining debt determination rules or debt collection rules. In some other cases, the different application of rules indicate that judges have interpreted those rules in a wrong way. By studying the judges’ existing value orientations and how judges made their decisions, we can evaluate whether existing rules for determining and collecting marital community debts have balanced conflicting values properly, and such facts can also build further consensus for the development of rules.
Why do rich countries flirt with fiscal disaster? Between the 1970s and the 2000s, during times of peace and prosperity, affluent countries—like Belgium, Greece, Italy, and Japan—accumulated so much ...debt that they became vulnerable and exposed themselves to the risk of default. In the past three decades, an extensive scholarly consensus emerged that these problems were created by fiscal indiscipline, the lack of sufficient concern for budgetary constraints from policy makers as they try to please voters. This approach formed the foundation for the fiscal surveillance system that attempted to bring borrowing in European countries under control via a set of fiscal rules. In the Red demonstrates that the problem of sustained, large-scale debt accumulation is an adjustment issue rather than a governance failure. Irrespective of whether the original impetus for borrowing arose from exogenous changes or irresponsible decision making, policy makers invariably initiate spending cuts and/or tax increases when debt grows at an alarming rate for several years in a row. Zsófia Barta argues that explaining why some countries accumulate substantial amounts of debt for decades hinges on understanding the conditions required to allow policy makers to successfully put into place painful adjustment measures.
Sovereign Solvency as Monetary Power Patrício Ferreira Lima, Karina
Journal of international economic law,
09/2022, Letnik:
25, Številka:
3
Journal Article
Recenzirano
Odprti dostop
ABSTRACT
This article reconceptualizes sovereign insolvency from a money-centred perspective. Drawing on contemporary critiques of money and finance, it argues that as long as the international ...monetary system is structured upon a hierarchy of currencies, monetary power determines the solvency of sovereign states. The ability to issue debt in own currency and the degree to which such currency performs the functions of money at an international level are the most important factors underpinning solvency. Sovereign insolvencies are inherent to the asymmetric character of global liquidity, rather than solely the product of fiscal misfortunes or mismanagement. To correct those asymmetries, it is necessary to reset the international monetary system. Yet insofar as this reform does not materialize, an international sovereign bankruptcy mechanism is indispensable to ensuring a more equitable global economic order.
The literature exploiting historical data generally supports the democratic advantage thesis, which holds that democracies can sell more bonds on better terms than their authoritarian counterparts. ...However, studies of more recent—and extensive—data sets find that democracies have received no more favorable bond ratings from credit rating agencies than otherwise similar autocracies; and have been no less prone to default. These findings raise the question: where is the democratic advantage? Our answer is that previous assessments of the democratic advantage have typically (1) ignored the democratic advantage in credit access; (2) failed to account for selection effects; and (3) treated GDP per capita as an exogenous variable, ignoring the many arguments that suggest economic development is endogenous to political institutions. We develop an estimator of how regime type affects credit access and credit ratings analogous to the “reservation wage” model of labor supply and treat GDP per capita as an endogenous variable. Our findings indicate that the democratic advantage in the postwar era has two components: first, better access to credit (most autocracies cannot even enter the international bond markets); and second, better ratings, once propensity to enter the market is controlled and GDP per capita is endogenized.
PDF
