Working Paper

A Journey in the History of Sovereign Defaults on Domestic-Law Public Debt

Abstract: We introduce a novel database on sovereign defaults that involve public debt instruments governed by domestic law. By systematically reviewing a large number of sources, we identify 134 default and restructuring events of domestic debt instruments, in 52 countries from 1980 to 2018. Domestic-law defaults are a global phenomenon. Over time, they have become larger and more frequent than foreign-law defaults. Domestic-law debt restructurings proceed faster than foreign ones, often through extensions of maturities and amendments to the coupon structure. While face value reductions are rare, net-present-value losses for creditors are still large. Unilateral amendments and post-default restructuring are the norm, but negotiated pre-default restructurings are becoming increasingly frequent. We also document that domestic-law defaults typically involve debt denominated in local currency and held by resident investors. We complement our analysis with a collection "sovereign histories", which provide the fine details about each episode.

Keywords: Public debt; Sovereign default; Domestic law; Database;

JEL Classification: E62; E65; F34; G01; H12; H63; K00; K41;

https://doi.org/10.17016/IFDP.2022.1338

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: International Finance Discussion Papers

Publication Date: 2022-03-18

Number: 1338