Coalition Governments And Sovereign Debt Crises

This article examines the domestic politics of sovereign debt crises. I focus on two alternative mechanisms that aggregate the preferences of domestic actors over debt repayment: single‐party versus multiparty coalition governments. I uncover a very strong empirical regularity using cross‐national data from 48 developing countries between 1971 and 1997. Countries that are governed by a coalition of parties are less likely to reschedule their debts than those under single‐party governments. The effect of multiparty coalitions on sovereign defaults is quantitatively large and roughly of the same order of magnitude as liquidity factors such as debt burden and debt service. These results are robust to numerous specifications and samples.