The Cost of Aggressive Sovereign Debt Policies: How Much is the Private Sector Affected?

Cover: IMF Working Paper, No. 29

Cover: IMF Working Paper, No. 29

Christoph Trebesch – 2009

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.

Titel
The Cost of Aggressive Sovereign Debt Policies: How Much is the Private Sector Affected?
Verlag
International Monetary Fund
Ort
Washington, DC
Datum
2009
Erschienen in
IMF Working Paper, No. 29.
Sprache
eng
Art
Text