Arellano, Cristina;
Mateos-Planas, Xavier;
Ríos-Rull, José-Víctor;
(2023)
Partial Default.
Journal of Political Economy
, 131
(6)
pp. 1385-1439.
10.1086/722934.
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Abstract
We document that countries partially default often and with varying intensity, resulting in lengthy episodes and hump-shaped patterns for partial default and debt. Default episodes lead to haircuts for lenders but not to reductions in debt, because the defaulted debt accumulates and borrowing continues. We present a theory of partial default rationalizing these patterns and the heterogeneity of partial default, and partial default’s comovements with spreads, debt, and output that are absent in standard sovereign default theory. We include policy counterfactuals in the form of pari passu and no-dilution clauses and debt-relief policies, and their welfare implications.
| Type: | Article |
|---|---|
| Title: | Partial Default |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1086/722934 |
| Publisher version: | https://doi.org/10.1086/722934 |
| Language: | English |
| Additional information: | This version is the version of record. For information on re-use, please refer to the publisher's terms and conditions. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10214416 |
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