Sovereign Default, Debt Restructuring, and Recovery Rates: Was the Argentinean "Haircut" Excessive? / Sebastian Edwards.

Format:

Book

Author/Creator:

Edwards, Sebastian.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20964.

NBER working paper series no. w20964

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Sovereign Default, Debt Restructuring, and Recovery Rates

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

I use data on 180 sovereign defaults to analyze what determines the recovery rate after a debt restructuring process. Why do creditors recover, in some cases, more than 90%, while in other cases they recover less than 10%? I find support for the Grossman and Van Huyk model of "excusable defaults": countries that experience more severe negative shocks tend to have higher "haircuts" than countries that face less severe shocks. I discuss in detail debt restructuring episodes in Argentina, Chile, Uruguay and Greece. The results suggest that the haircut imposed by Argentina in its 2005 restructuring (75%) was "excessively high." The other episodes' haircuts are consistent with the model.

Notes:

Print version record

February 2015.