Working Paper: NBER ID: w18855
Authors: Michael Tomz; Mark L. J. Wright
Abstract: In this essay we review the empirical literature about sovereign debt and default. As we survey the work of economists, historians, and political scientists, we also emphasize parallel developments by theorists and recommend steps to improve the correspondence between theory and data.
Keywords: No keywords provided
JEL Codes: C82; E01; F21; F34; F51; F55; N20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Repayment behavior (G51) | Future borrowing capacity (G32) |
| Default (Y70) | Exclusion from international capital markets (F65) |
| Repayment (G51) | Future borrowing opportunities (G51) |
| Default (Y70) | Costs such as loss of access to capital markets and economic sanctions (F51) |
| Probability of default (G33) | Bond pricing (G12) |
| Higher default risks (G32) | Increased yields on sovereign bonds (G15) |
| Domestic political factors (D72) | Decision to repay or default (G33) |
| Stronger political institutions (P16) | Lower default rates (E43) |
| Historical default events (N23) | Current borrowing costs (G21) |