Sovereign Bond Restructuring: Commitment vs. Flexibility / Jason Roderick Donaldson, Lukas Kremens, Giorgia Piacentino.

Format:

Book

Author/Creator:

Donaldson, Jason Roderick.

Contributor:

National Bureau of Economic Research.

Kremens, Lukas.

Piacentino, Giorgia.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29872.

NBER working paper series no. w29872

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

Sovereigns in distress often engage in debt restructuring, typically negotiating with multiple classes of bondholders at once. We use natural experiments to investigate whether sovereign bondholders benefit from committing not to restructure. We find that committing not to restructure one class of bonds is valuable for not only that class, but, in contrast to received theory, for others too. We develop a model to rationalize these cross-bond spillovers. It points to a system of cross-bond equations that, we show, can be exploited to quantify natural experiments and to estimate unobservable elasticities in terms of a few sufficient statistics.

Notes:

Print version record

March 2022.