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Domestic vs external sovereign debt servicing: an empirical analysis

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  • Emanuel Kohlscheen

    (Department of Economics, University of Warwick, UK)

Abstract

This paper analyzes the incidence of domestic and external debt crises for a sample of 53 emerging economies between 1980 and 2005. Even though there is substantial time variation in the default rates during the period, sovereign default rates for domestic debts are typically lower than those for external debts. The incidence of both types of defaults is explained by means of the estimation of independent and simultaneous limited-dependent variable models. The results show that while there is considerable evidence that external defaults trigger domestic defaults, evidence for the reverse link disappears when default propensities are estimated in a simultaneous equation model. Copyright © 2009 John Wiley & Sons, Ltd.

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  • Emanuel Kohlscheen, 2010. "Domestic vs external sovereign debt servicing: an empirical analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(1), pages 93-103.
    • Handle: RePEc:ijf:ijfiec:v:15:y:2010:i:1:p:93-103
    DOI: 10.1002/ijfe.414
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    2. Jianu, Ionuț & Pîrșcoveanu, Laura-Mădălina & Tudorache, Maria-Daniela, 2017. "The impact of financial risks on economic growth in EU-15," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 0(1 (610)), pages 23-44.
    3. Michael Tomz & Mark L.J. Wright, 2013. "Empirical Research on Sovereign Debt and Default," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 247-272, May.
    4. Mark Wright, 2018. "The Seniority Structure of Sovereign Debt," 2018 Meeting Papers 928, Society for Economic Dynamics.
    5. Kashif Munir & Nisma Riffat Mehmood, 2018. "Exploring the Channels and Impact of Debt on Economic Growth," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 19(2), pages 171-191, September.
    6. Podstawski, Maximilian & Velinov, Anton, 2018. "The state dependent impact of bank exposure on sovereign risk," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 63-75.
    7. Elias A. Udeaja & Nathan Audu, 2023. "Asymmetric Effect of External Debt and Foreign Capital Flows on Economic Growth: New Evidence from Nigeria," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 9(3), pages 345-368, July.
    8. Ricardo Sabbadini, 2017. "Overcoming the Original Sin: Gains from Local Currency External Debt," Working Papers, Department of Economics 2017_27, University of São Paulo (FEA-USP).
    9. Aitor Erce, 2012. "Selective sovereign defaults," Globalization Institute Working Papers 127, Federal Reserve Bank of Dallas.
    10. Aitor Erce & Enrico Mallucci & Mattia Picarelli, 2021. "A Journey in the History of Sovereign Defaults on Domestic Law Public Debt," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 2106, Departamento de Economía - Universidad Pública de Navarra.
    11. Aitor Erce Domiguez, 2010. "Debtor Discrimination During Sovereign Debt Restructurings," 2010 Meeting Papers 1324, Society for Economic Dynamics.
    12. Enrico Mallucci, 2022. "Domestic Debt and Sovereign Defaults," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(6), pages 1741-1775, September.
    13. Stephen Bagwell, 2023. "Repudiation and Repression: The Human Costs of Sovereign Default," Social Sciences, MDPI, vol. 12(3), pages 1-13, February.

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