Skip to main content Skip to main content
SHARE   Share on Twitter Share on Facebook Share on LinkedIn Email

Sovereign Debt Restructurings

Sovereign debt crises generally involve debt restructurings characterized by a mix of face-value haircuts and debt maturity extensions. We develop a quantitative model of endogenous sovereign debt maturity choice and restructuring that captures key stylized facts of debt over the business cycle and during restructuring episodes, including the variation of haircuts, maturity extensions and default duration found in the data. We also find that policy interventions implementing minimum haircuts and redistributing losses away from holders of short term debt improve the outcome of distressed debt restructurings and reduce the frequency of debt distress events. Methodologically, the use of dynamic discrete choice solution methods allows us to smooth decision rules on default and debt portfolio choices, rendering the problem tractable.

Read Full Text

https://doi.org/10.20955/wp.2018.013


Subscribe to our newsletter


Follow us

Twitter logo Google Plus logo Facebook logo YouTube logo LinkedIn logo
Back to Top