Skip to main content
Article thumbnail
Location of Repository

Sovereign risk: constitutions rule

By Emanuel Kohlscheen

Abstract

This paper models the executive's choice of whether to reschedule external debt as the outcome of an intra-governmental negotiation process. The executive's necessity of a confidence vote from the legislature is found to provide the rationale for why some democracies may not renegotiate their foreign obligations. Empirically, parliamentary democracies are indeed less prone to reschedule their foreign liabilities or accumulate arrears on them. Most of the democracies that have been able to significantly reduce their debt/GNP ratio without a 'credit incident' were parliamentary. Moreover, countries with stronger political checks on the executive and lower executive turnover have a lower rescheduling propensity. These results suggest that North and Weingast's account of the evolution of institutions in 17th century England gives substantial mileage in understanding the international debt markets in the contemporary developing world

Topics: HJ
Publisher: University of Warwick, Department of Economics
Year: 2005
OAI identifier: oai:wrap.warwick.ac.uk:1464

Suggested articles

Citations

  1. (2003). A political model of sovereign debt repayment. doi
  2. (2005). A sovereign debt model with trade credit and reserves. doi
  3. (1989). Constitutions and commitment: the evolution of institutions governing public choice in seventeenth-century England. doi
  4. (1998). Convenient estimators for the panel probit model. doi
  5. (2003). Debt intolerance. doi
  6. (1989). Debt, adjustment and growth: Turkey”,
  7. (2002). Democratic default: domestic audiences and compliance with international agreements.
  8. (2002). Econometric analysis of cross section and panel data. doi
  9. (2002). Economic growth and judicial independence: cross country evidence using a new set of indicators. doi
  10. (2002). Financial crises and political crises. doi
  11. (2001). Global Development Finance doi
  12. (2003). Governance matters III: governance indicators for 1996-2002. doi
  13. (1989). How sovereign debt has worked.
  14. (1996). Insuring sovereign risk against default. World Bank Discussion Papers,
  15. (2001). Malaysia: was it different ? doi
  16. (1992). Presidents and assemblies: constitutional design and electoral dynamics. Cambridge University Press. 39T i r o l e doi
  17. (1989). Sovereign debt: is to forgive to forget ? doi
  18. (2003). The economic effects of constitutions: what do the data say ?
  19. (2000). The institutional environment for economic growth. doi
  20. (1990). The Paris club. An inside view. The North-South Institute.
  21. (2003). The price of democracy: sovereign risk ratings, bond spreads and political business cycles in developing countries. Forthcoming in doi
  22. (2003). Time consistency in dynamic bargaining: the role of committees as substitutes for commitment.
  23. (2002). Veto players: how political institutions work. doi
  24. (1991). Why are stabilizations delayed ? doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.