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A journey in the history of sovereign defaults on domestic-law public debt

Working papers

Title: A journey in the history of sovereign defaults on domestic-law public debt

Download PDF: Working Paper 51

This paper uses a novel database to provide a unique overview of the last four decades of sovereign debt restructuring of public debt governed by local law.

Authors: Aitor Erce (Navarra Public University), Enrico Mallucci (Board of Governors of the Federal Reserve System) and Mattia Picarelli (ESM)



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.

Disclaimer: This Working Paper should not be reported as representing the views of the ESM. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the ESM or ESM policy. No responsibility or liability is accepted by the ESM in relation to the accuracy or completeness of the information, including any data sets, presented in this Working Paper.

Keywords: Public debt, sovereign default, domestic law, database.

JEL codes: E62, E65, F34, G01, H12, H63, K00, K41

Database: Monthly debt default and restructuring database (Excel file)

Companion paper: A Journey in the History of Sovereign Defaults on Domestic Law Public Debt – Sovereign Histories

Source: European Stability Mechanism | Working Paper Series | Volume 2022 | No 51 | March 2022 | 34 Pages

Copyright © European Stability Mechanism, 2022 | All rights reserved. Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in part, is permitted only with the explicit written authorisation of the European Stability Mechanism.