International Finance Discussion Papers (IFDP)
March 2022
A Journey in the History of Sovereign Defaults on Domestic-Law Public Debt
Aitor Erce, Enrico Mallucci and Mattia Picarelli
Abstract:
We introduce a novel database on sovereign defaults that involve public debt instruments governed by domestic law. By systematically reviewing a large number of sources, we identify 134 default and restructuring events of domestic debt instruments, in 52 countries from 1980 to 2018. Domestic-law defaults are a global phenomenon. Over time, they have become larger and more frequent than foreign-law defaults. Domestic-law debt restructurings proceed faster than foreign ones, often through extensions of maturities and amendments to the coupon structure. While face value reductions are rare, net-present-value losses for creditors are still large. Unilateral amendments and post-default restructuring are the norm, but negotiated pre-default restructurings are becoming increasingly frequent. We also document that domestic-law defaults typically involve debt denominated in local currency and held by resident investors. We complement our analysis with a collection "sovereign histories", which provide the fine details about each episode.
DOI: https://doi.org/10.17016/IFDP.2022.1338
PDF: Full Paper
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