Details

Autor(en) / Beteiligte

• Tomz, Michael
• Wright, Mark L. J.

Titel

DO COUNTRIES DEFAULT IN "BAD TIMES"?

Ist Teil von

• Journal of the European Economic Association, 2007-04, Vol.5 (2-3), p.352-360

Ort / Verlag

Oxford, UK: Blackwell Publishing Ltd

Erscheinungsjahr

2007

Quelle

EBSCOhost Business Source Ultimate

Beschreibungen/Notizen

• This paper uses a new dataset to study the relationship between economic output and sovereign default for the period 1820-2004. We find a negative but surprisingly weak relationship between economic output in the borrowing country and default on loans from private foreign creditors. Throughout history, countries have indeed defaulted during bad times (when output was relatively low), but they have also suspended payments when the domestic economy was favorable, and they have maintained debt service in the face of adverse shocks. This constitutes a puzzle for standard theories of international debt, which predict a much tighter negative relationship as default provides partial insurance against declines in output.