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Federal Reserve Bank of Minneapolis
Working Papers
The Seniority Structure of Sovereign Debt
Matthias Schlegl
Christoph Trebesch
Mark L. J. Wright

Sovereign governments owe debt to many foreign creditors and can choose which creditors to favor when making payments. This paper documents the de facto seniority structure of sovereign debt using new data on defaults (missed payments or arrears) and creditor losses in debt restructuring (haircuts). We overturn conventional wisdom by showing that official bilateral (government-to-government) debt is junior, or at least not senior, to private sovereign debt such as bank loans and bonds. Private creditors are typically paid first and lose less than bilateral official creditors. We confirm that multilateral institutions like the IMF and World Bank are senior creditors.

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Matthias Schlegl & Christoph Trebesch & Mark L. J. Wright, The Seniority Structure of Sovereign Debt, Federal Reserve Bank of Minneapolis, Working Papers 759, 30 May 2019.
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Keywords: Sovereign default; Arrears; Insolvency; Priority; IMF; Official debt; Sovereign bonds; International financial architecture; Pecking order
DOI: 10.21034/wp.759
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