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The Cost of Aggressive Sovereign Debt Policies: How Much is theprivate Sector Affected?
Author:
Christoph Trebesch null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 029
Language:
English
Publication Date:
01 Feb 2009
DOI:
https://doi.org/10.5089/9781451871760.001
ISBN:
9781451871760
ISSN:
1018-5941
Pages:
37
Keywords:
WP; debt policy; debt crisis; emerging market; crisis episode; Sovereign Default; External Debt; Crisis Resolution; Reputation Spillovers; issuance data; debt flow; default dummy; debt exchange; inexcusable debt repudiation; debt crisis period; debt issuance; debt contract; debt crisis effect; crisis effect; debt crisis situation; Debt default; Credit; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper proposes a new empirical measure of cooperative versus conflictual crisis resolution following sovereign default and debt distress. The index of government coerciveness is presented as a proxy for excusable versus inexcusable default behaviour and used to evaluate the costs of default for the domestic private sector, in particular its access to international debt markets. Our findings indicate that unilateral, aggressive sovereign debt policies lead to a strong decline in corporate access to external finance (loans and bond issuance). We conclude that coercive government actions towards external creditors can have strong signalling effects with negative spillovers on domestic firms. "Good faith" debt renegotiations may be crucial to minimize the domestic costs of sovereign defaults.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund