Working Papers

A. Erce, E. Mallucci, M. Picarelli: A Journey in the History of Sovereign Defaults on Domestic Law Public Debt

We introduce a novel database on sovereign defaults that involve public debt in- struments governed by domestic law. By systematically reviewing a large number of sources, we identify 134 default and restructuring events of domestic debt instru- ments, in 52 countries from 1980 to 2018. Domestic-law defaults are a global phe- nomenon. 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.

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