The macroeconomic effects of official debt restructuring : evidence from the Paris Club.
Date: 2017-01-04
Institutions: European Stability Mechanism
Subjects: aid for restructuring, budget policy, debt reduction, economic consequence, economic growth, economic integration, macroeconomics, monetary agreement, public debt

Working Paper Series  | 21 |  2016

The Macroeconomic Effects of Official 
Debt Restructuring: Evidence from
the Paris Club

This paper finds that official-sector creditors face policy trade-offs
for debt relief provision between growth, fiscal prudence and 
market access

Gong Cheng 
European Stability Mechanism
Javier Diaz-Cassou 
Inter-American Development Bank
Aitor Erce 
European Stability Mechanism

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.

Working Paper Series  |  21  |  2016

The Macroeconomic Effects of Official
Debt Restructuring: Evidence from 
the Paris Club

Gong Cheng1 European Stability Mechanism 
Javier Diaz-Cassou2 Inter-American Development Bank
Aitor Erce3 European Stability Mechanism

Abstract
This paper presents new empirical results on the macroeconomic impact of sovereign debt restructurings with 
official-sector creditors. Using a novel dataset on Paris Club restructurings and Local Projection methods, we 
find that Paris Club treatments can have a significant impact on economic growth -- 2% higher GDP growth two 
years after the restructuring -- when a nominal haircut is provided. At the same time, the countries that had 
received nominal debt relief tend to be less prudent in conducting their fiscal policy than those benefiting from 
a restructuring in NPV terms. Furthermore, as regards the external sector adjustment after debt restructuring, 
we observe an improvement in the net foreign asset position, due to the combination of less external debt and 
higher foreign reserves. Our study suggests that the official sector faces some short-term trade-offs between 
the objectives of stimulating economic growth, promoting fiscal prudence and improving a country’s position in 
international capital markets when designing a debt restructuring.

Keywords: Official Creditors, Sovereign Debt Restructuring, Growth, Fiscal Stance, External 
Sector Adjustment, Local Projections
JEL codes: C53, F33, F34, H62, H63

1 Email: g.cheng@esm.europa.eu

2 Email: jdiaz@iadb.org

3 Email: a.erce@esm.europa.eu

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.

© European Stability Mechanism, 2016 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.

ISSN 2443-5503 
ISBN 978-92-95085-35-0

doi:10.2852/770562 
EU catalog number DW-AB-16-010-EN-N

The Macroeconomic Eﬀects of Oﬃcial Debt
Restructuring: Evidence from the Paris Club∗

Gong Cheng1, Javier Diaz-Cassou2, and Aitor Erce†1

1European Stability Mechanism
2Inter-American Development Bank

December 29, 2016
Abstract
This paper presents new empirical results on the macroeconomic im-
pact of sovereign debt restructurings with oﬃcial-sector creditors. Us-
ing a novel dataset on Paris Club restructurings and Local Projection
methods, we ﬁnd that Paris Club treatments can have a signiﬁcant
impact on economic growth — 2% higher GDP growth two years af-
ter the restructuring — when a nominal haircut is provided. At the
same time, the countries that had received nominal debt relief tend
to be less prudent in conducting their ﬁscal policy than those bene-
ﬁting from a restructuring in NPV terms. Furthermore, as regards
the external sector adjustment after debt restructuring, we observe an
improvement in the net foreign asset position, due to the combination
of less external debt and higher foreign reserves. Our study suggests
that the oﬃcial sector faces some short-term trade-oﬀs between the
objectives of stimulating economic growth, promoting ﬁscal prudence
and improving a country’s position in international capital markets
when designing a debt restructuring.
Keywords: Oﬃcial Creditors; Sovereign Debt Restructurings; Growth;
Fiscal Stance; External Sector Adjustment; Local Projections
JEL codes: C53; F33; F34; H62; H63

∗We thank A. Bassaneti, A. Gelpern, D. Lombardi, L. Martinez, C. Reinhart, R.
Strauch, C. Trebesch, and seminar participants at Glasgow University’s Sovereign Debt
Restructuring Workshop and the European Stability Mechanism for their insightful com-
ments. S. Gutierrez, J. E. Mosquera and A. Di Chiara provided superb research assistance
at diﬀerent stages of the project. The views in this paper are the authors’ and are not to
be reported as those of the Inter-American Development Bank or the European Stability
Mechanism.

†Corresponding author:a.erce@esm.europa.eu

1

1

Introduction

Although there is extensive literature on sovereign debt restructurings, most
attention has been paid to episodes involving private creditors. By contrast,
little systematic evidence has been produced on the characteristics and im-
plications of debt restructurings involving oﬃcial creditors. This is most
peculiar, given that oﬃcial creditors have historically played a fundamental
role in the resolution of sovereign debt crises, as highlighted by IMF (2013)
and Trebesch et al. (2012), and visually described in Figure 1 below. In fact,
one only needs to consider the recent events in Argentina, Ukraine or Greece
to understand the ongoing relevance of this statement.

[Figure 1 — All ﬁgures and tables are presented in the annex on p. 13 ]

In this paper we shed new light on this issue. We use the dataset on Paris
Club debt restructuring deals presented in Cheng et al. (2016), which contains
all agreements concluded since 1956 to 2015, and the local projections method
(Jord`a 2005), to deepen our knowledge on the macroeconomic eﬀects of oﬃ-
cial sector debt restructurings. Our analysis contributes to the still narrow,
but growing, literature on oﬃcial sector debt relief.1 Easterly (2002) ﬁnds
that, paradoxically, debt relief to Highly Indebted Poor Countries (HIPC)
often resulted in increased indebtedness. Using a gravity model, Rose (2005)
documents the negative eﬀect of oﬃcial debt restructurings on trade.2 Arteta
and Hale (2008) ﬁnd that oﬃcial debt restructurings are more damaging for
the country’s access to capital markets than restructurings involving private

1From a private sector perspective the literature is ample. Gelos et al. (2011) and
Wright and Tomz (2005) focus on the eﬀect of sovereign defaults on the conditions of
market access. Borensztein and Panizza (2009) present a widely cited compilation on the
costs of sovereign default. Borensztein and Panizza (2009) look at the eﬀect on reputa-
tion. Cruces and Trebesch (2013) study sovereign market access after a private-sector
involvement (PSI) using a database on haircuts. They ﬁnd that larger haircuts predict
harder market access. In turn, Asonuma and Trebesch (2016) study the diﬀerent dynam-
ics created by pre-preemptive and post-default restructurings. There are also two very
recent papers dealing with the costs of debt restructurings: Asonuma et al. (2016) and
Kuvshinov and Zimmermann (2016).

2He ﬁnds that following debt restructurings, trade falls by 8 percent of GDP.

2

creditors. Trebesch et al. (2012) present evidence of serial defaulting, show-
ing that oﬃcial sector debt restructurings have been widespread both in time
and across countries. Reinhart and Trebesch (2016) study the eﬀects of debt
relief by comparing episodes during the 1930s (oﬃcial relief for European
nations) and the 1990s (private relief for Latin American countries via the
Brady Plan). Using a diﬀerence-in-diﬀerence approach to study the eﬀects of
the Brady Plan, Reinhart and Trebesch (2016) conclude that debt restruc-
turings are more beneﬁcial for growth when they provide nominal haircuts
than when relief is in Net Present Value (NPV) terms (through maturity ex-
tensions or interest rate reductions). Finally, our paper is also closely related
to Forni et al. (2016), who also study the impact of Paris Club agreements
on growth. These authors observe that debt relief has the largest growth im-
pact for countries that exit restructurings with relatively low debt levels.3 As
highlighted by Cruces and Trebesch (2013) in the context of debt restructur-
ing of privately held sovereign debt, a limitation in Forni et al. (2016) is the
absence of information regarding the features of the Paris Club treatment.
Forni et al. (2016) mainly focus on the restructuring of privately-held claims
(PSI); Paris Club agreements are represented by a simple dummy variable.
Our characterisation of Paris Club treatments is signiﬁcantly richer, includ-
ing information on NPV losses for creditors and on the extent of provision
of nominal debt relief, allowing us to go further in the analysis of the eﬀects
of oﬃcial debt restructurings on the receiving economy.

Our results extend the intuition presented in Reinhart and Trebesch
(2016) to the restructuring of oﬃcial claims. We show that Paris Club treat-
ments can have a signiﬁcant impact on economic growth. We ﬁnd, however,
that this result holds only for the debt treatment involving a nominal hair-
cut. Remarkably, such agreements lead, on average, to 2 percent higher GDP
after two years. By contrast, Paris Club treatments carrying only NPV relief
have no impact on growth. Moreover, our ﬁndings show that the diﬀerence

3From a technical perspective, they tackle endogeneity concerns regarding the eﬀects
of PSI using a diﬀ-in-diﬀ IV strategy. In addition, similar to Kuvshinov and Zimmermann
(2016) and Jord`a and Taylor (2016), to reduce selection biases, they use a matching
estimator.

3

in growth patterns between restructurings carrying nominal debt reductions
and those relying only on NPV measures is statistically diﬀerent whenever
the level of NPV relief is relatively low. In addition, along the ﬁndings in
Easterly (2002), we document the ﬂip-side of this growth story. Our results
show that countries not receiving nominal debt relief turn out to be more
likely to pursue a prudent ﬁscal policy after the restructuring than those
receiving a nominal haircut. Moreover, as regards the external sector ad-
justment after debt restructuring, we observe an improvement in a country’s
net foreign asset position, due to the combination of less external debt and
higher foreign reserves. From a policy perspective, our results provide ad-
ditional evidence to support the idea that when designing a solution to a
debt overhang, the oﬃcial sector faces a trade-oﬀ between the objectives of
stimulating economic growth and of promoting ﬁscal prudence.

The rest of the paper is structured as follows. Section II introduces the
dataset and presents a few stylised facts. Section III outlines the methodology
used for the empirical analysis. Section IV presents the empirical results
to unveil the causal impact of Paris Club restructurings on the economic
performance of debtors. Finally, section V concludes.

2 Data

2.1 The Paris Club

As detailed in Cheng et al. (2016) and Trebesch et al. (2012), the Paris Club
is an informal forum, hosted by the French Treasury in Paris, where, since
1956, creditor governments have conducted debt-rescheduling negotiations
with sovereign debtors in a coordinated manner.

In order to carry on our analysis, we use the dataset of Cheng et al. (2016)
on oﬃcial debt restructurings conducted through the Paris Club. It contains
information about 429 treatments with 79 debtors.4 For each agreement, we
use the following information: the signing country, the date of the agreement,

4As detailed in Cheng et al. (2016), this database was hand-collected from the Paris

Club website by agreement.

4

the total amount of debt treated, the nominal relief provided (if any), and the
terms of the agreement. As described in Cheng et al. (2016) and summarised
in Table 1, each of these terms of agreement implies a diﬀerent degree of
nominal and/or NPV debt relief.

[Table 1]

2.2 Other data

We complemented our dataset with information on the income level, the lend-
ing category and a number of macroeconomic and ﬁscal variables, of each of
the countries included in our sample, that past literature on debt defaults
has paid attention to. The variables included are: nominal GDP, real GDP
growth, total public debt, debt service (interest and principal payments), ﬁs-
cal revenues, ﬁscal expenses and balance-of-payments. They were extracted
from the World Bank’s World Development Indicators and the IMF’s Inter-
national Financial Statistics, and cover the period 1960-2015. Given that
our dataset on Paris Club events is quarterly while the macroeconomic and
ﬁscal variables that we use are only available yearly, we resort to a linear
interpolation in order to transform them into a quarterly frequency.

3 Methodology: Local Projections

As amply discussed in the literature, understanding the macroeconomic ef-
fects of sovereign defaults is not an easy task. This is so because defaults are
endogenous to countries economic circumstances, thus complicating the task
of extracting the structural eﬀects that debt-restructuring events may have.
One way to overcome this technical diﬃculty is to look only at default events
that can be regarded as exogenously determined. For instance, Reinhart
and Trebesch (2016) look at collectively orchestrated restructurings, such as
war debt restructurings in the 1930s for advanced economies, or the Brady
plan in the 1980s for Latin American countries. Forni et al. (2016) use the
same approach and consider private restructurings after a Paris Club event

5

as exogenous. Kuvshinov and Zimmermann (2016) present an alternative
approach to measure the eﬀects of PSI by estimating impulse-response func-
tions (IRFs). They argue that this modeling technique is suitable because it
explicitly controls for the endogenous feedbacks inherent to the dynamic re-
lation between defaults and the macroeconomic context in which they occur.

We follow this latter approach and study the impact of Paris Club restruc-
turings on economic outcomes by estimating IRFs that control for dynamic
feedback eﬀects, using “local projections” (Jord`a 2005). This methodology,
which provides a ﬂexible alternative to VAR approaches, allows us to directly
project the behavior of our variables of interest to the signing of a treatment
with the Paris Club, by computing estimates of the h-step ahead cumula-
tive average treatment eﬀect on the variable under study. In practice, local
projections are regression-adjusted diﬀerence-in-diﬀerence estimates that col-
lapse the time series information in a pre- and a post-period for each step
ahead.5

In our basic linear speciﬁcation, the responses of our variables of interest
to a debt restructuring at horizon h is obtained from the following equation:

(cid:52) Yi,t+h = αi,h + βhP Ci,t + Φh(L) (cid:52) Yi,t−1 + Ψh (cid:52) Xi,t−1 + σt,h + µi,t,h

where (cid:52)Yi,t+h = Yi,t+h − Yi,t+h−1 for h ≥ 0, and (cid:52)Yi,t+h represents the
accumulated change in the variable under scrutiny at time t + h. The lag
polynomial Φh(L) represent four lags. P Ci,t represents a dummy for the
signing of an Paris Club treatment and Xi,t−1 covers the following set of
lagged controls: GDP growth, government debt, inﬂation, ﬁscal deﬁcit, world
GDP growth, and the US 10-year rate. Finally, we include country and year
dummies.

Every equation, for each h, is estimated using a standard ordinary least

5Comparing Local Projections, a standard structural VAR and a dynamic simulation,
Owyang et al. (2013) ﬁnd that the results are similar for the ﬁrst 16 periods. For longer
horizons, Local Projections tends to produce statistically signiﬁcant oscillations. Since, in
this study, we focus on the short- to medium-horizon eﬀects of oﬃcial debt restructurings,
we can safely disregard this drawback.

6

squares approach. We use robust Driscoll and Kraay (1998) standard errors
to correct for potential heteroskedasticity, autocorrelation in the lags and
error correlation across panels.

Agreement-speciﬁc features and macroeconomic outcomes

Similar to what has been observed for restructurings involving privately-
held sovereign debt (Asonuma and Trebesch 2016), Paris Club treatments
are likely to have diﬀerent macroeconomic eﬀects, depending on the speciﬁc
features of the agreement reached and the underlying circumstances of the
country requesting the treatment.

To study this possibility and capture these potential diﬀerences, we follow
Jord`a and Taylor (2016) and Kuvshinov and Zimmermann (2016) and study
the heterogeneous eﬀects of diﬀerent Paris Club debt treatments by assigning
them into one of a set of mutually excluding restructuring strategies (bins).
The assignment of the episodes to speciﬁc bins is done on the basis of the
features of the agreements whose eﬀect we want to study. Following this
approach, we test the eﬀects of Paris Club treatments in two dimensions: (i)
included nominal debt reduction, and (ii) the size of the NPV relief provided.

Separating restructurings between those with and without nominal debt
reductions is immediate with our dataset. In turn, we separate Paris Club
treatments in high and low NPV by using the median value of the haircuts
within the sample as a threshold. When the NPV granted by the Paris
Club, as reported in our dataset, is above the median, we consider that
restructuring episode to be one with a large NPV.

To calculate these non-linear eﬀects, we upgrade our original model to
include interaction terms, through which we can separately estimate the ef-
fects of each restructuring approach (as represented by the corresponding
bin). Thus, our new estimation strategy is based on the following equation:

(cid:52) Yi,t+h = αi,h +

K
(cid:88)

k=1

h(P Ci,t · Dk
βk

i,t) + Φh(L) (cid:52) Yi,t−1 + Ψh (cid:52) Xi,t−1 + µi,t,h

7

where Dk
i,t is each one of the K mutually exclusive groups of Paris Club
treatments. Dk
i,t takes a value one if the restructuring experienced by coun-
try i and time t featured the characteristic of interest K. As before, P Ci,t
represents our Paris Club dummy. Xi,t−1 covers the same set of controls we
included in the previous estimation.

We build the IRFs from the βk

i,t = 1).
Finally, we test the statistical signiﬁcance of the diﬀerences between the
two restructuring approaches by comparing the statistical signiﬁcance of the
pair-wise diﬀerences of these coeﬃcients, βi

h coeﬃcients (where we assume Dk

h − βj

k,h.

4 Empirical analysis

4.1 Growth perspective

First, we look at the overall real GDP growth after a restructuring event, as
it is shown in Figure 2. It is increasing from a slightly negative territory to
reach 0.5 percentage point higher in two years and a half.

[Figure 2]

Figure 3 shows there is a signiﬁcant diﬀerence between restructuring with
a nominal haircut and those without. The real GDP growth rate is signif-
icantly positive and increasing at the 95% conﬁdence level with restructur-
ings delivering nominal debt reduction. On the contrary, the events asso-
ciated with debt reduction in NPV terms do not generate signiﬁcant post-
restructuring growth.

[Figure 3]

Does the size of NPV relief matter? We tested the statistical diﬀerence
between a nominal haircut on the one hand and high or low NPV relief
respectively on the other. High NPV relief is deﬁned as a NPV relief superior
to 50% of the total debt treated. The results of these statistical tests are

8

shown in Table 2. We ﬁnd that a nominal haircut generates much stronger
real GDP growth than a restructuring having only low NPV relief. This result
is statistically signiﬁcant with a conﬁdence interval of at least 90%. However,
the diﬀerence in terms of real GDP growth between a nominal haircut and
high NPV relief is not statistically signiﬁcant. This is an important policy
result as we will see below that a nominal haircut and high NPV relief have
diﬀerent implications on ﬁscal variables as well.

[Table 2]

4.2 Debt trajectory

We are also interested in uncovering how public debt behaves after a restruc-
turing event with the Paris Club. Figure 4 shows that the government debt
in the full sample signiﬁcantly decreases with a 90% conﬁdence interval only
8 quarters after the restructuring.

[Figure 4]

Once we disentangle nominal restructuring from restructurings without
nominal debt reduction, we observe in Figure 5 that government debt de-
creases even one quarter after the restructuring at the 95% conﬁdence inter-
val. In comparison, there is no statistically signiﬁcant debt deduction with
the restructuring events involving only NPV relief.

[Figure 5]

As before, we examine if the size of the NPV relief matters. Table 3 shows
that a nominal haircut unambiguously generates a lower debt level after
restructuring than both high and low NPV relief. However, this diﬀerence
presents a stronger statistical signiﬁcance with lower NPV relief than with
higher NPV relief.

9

[Table 3]

As regards the debt-servicing burden, Figure 6 and 7 show that debt
amortisation and interest payment both decrease with nominal debt reduc-
tion, while they both increase signiﬁcantly after a restructuring without a
nominal haircut. The results remain unchanged even if we control for the
size of the NPV relief (results available upon request).

[Figure 6 and 7]

4.3 Fiscal performance

Once we understand the implications for GDP growth and for the dynamics
of the debt stock and debt servicing, we turn to examine how ﬁscal variables
behave following a debt treatment by the Paris Club restructuring.

The full sample in Figure 8 shows a continuous improvement of the ﬁscal
deﬁcit (a negative number corresponds to a ﬁscal surplus), which is statisti-
cally signiﬁcant up to four quarters after the restructuring.

[Figure 8]

However, the ﬁscal deﬁcit behaves very diﬀerently depending on the re-
structuring approach oﬀered. According to Figure 9, the ﬁscal deﬁcit seems
to increase three quarters after a nominal haircut, although the result is not
statistically signiﬁcant. However, the ﬁscal deﬁcit decreases signiﬁcantly fol-
lowing a restructuring oﬀering NPV relief only. Once we control for the size
of the NPV relief, this result becomes even more pronounced. The ﬁscal
deﬁcit rises six quarters after a nominal haircut with the 90% conﬁdence
interval while high NPV relief is associated with strong ﬁscal surplus (see
Figure 10). Table 4 also reports the diﬀerences in the size of the ﬁscal deﬁcit
between a nominal haircut and high NPV relief on the one hand and between
a nominal haircut and low NPV relief on the other. It is clear that there are
some costs in terms of ﬁscal behaviour associated with a nominal haircut that

10

counterbalance the growth beneﬁts. Although the growth perspective is less
promising after a debt relief in NPV terms, the ﬁscal deﬁcit associated with
a bigger-than-50% NPV relief decreases signiﬁcantly with a 95% conﬁdence
interval.

[Figure 9 and 10]

[Table 4]

One can speculate about why the ﬁscal deﬁcit increases with a nominal
haircut while it decreases with NPV restructurings. One reason would be
that with a lower debt burden, a country is able to use expansionary ﬁscal
policy measures to stimulate economic growth. Figure 11 shows non-debt
ﬁscal expenditure does increase signiﬁcantly after a nominal haircut while it
decreases with other types of restructurings.

[Figure 11]

4.4 External sector adjustment

Finally, we also examine the trajectory of countries’ trade balance, capital
account balance and foreign reserves, which the three main components of
countries’ balance-of-payments. The trajectories of these three variables are
shown in Figure 12, 13 and 14.

[Figure 12, 13 and 14]

The ﬁrst observation to highlight is that for restructurings with a nomi-
nal haircut, the trajectory of the trade balance is not signiﬁcantly diﬀerent
from zero, while the trade balance associated with non-nominal debt restruc-
turings is slightly positive and signiﬁcant. This result sheds further light on
the conclusion of Rose (2005), who argues that sovereign default may harm
international trade either because creditors want to deter default by debtors,

11

or because trade ﬁnance dries up after a default.
It seems that the harm
comes from debt restructuring exercises featuring a nominal debt reduction.
Finally, considering the trajectory of capital account balance and of the stock
of foreign reserves, it seems that the countries that had received a debt hair-
cut are more able to secure foreign capital inﬂows and their governments are
able use new ﬁnancial income to build up their stock of reserves rather than
to pay down foreign debt. This result could suggest that investors have a
rather short memory on debt relief (see Gelos et al. 2011) and are rather
dubious about the debt sustainability of a country that did not receive nom-
inal debt reduction. Our ﬁnding ﬁnds a parallel in Asonuma (2016), which
documents exchange rate depreciation around private debt restructurings.

5 Conclusion

What are the economic implications of reaching a debt restructuring agree-
ment with the oﬃcial sector? In this paper we answer this question using
data for the Paris Club. We ﬁnd that Paris Club treatments can have a sig-
niﬁcant impact on economic growth. According to our estimates, only those
restructurings that carry a nominal haircut seem to unambiguously raise the
economic prospects of debtors: remarkably, such agreements lead, on av-
erage, to 2 percent higher GDP growth after two years. By contrast, Paris
Club treatments carrying only NPV relief have no positive impact on growth.
However, the countries that receive these restructuring conditions turn out
to be more likely to pursue a prudent ﬁscal policy after the event than those
receiving a nominal haircut. Our results show that when lack of ﬁscal disci-
pline is the underlying problem, nominal haircuts are not a solution. Finally,
when looking at the external side dynamics, we observe an improvement in
the net foreign asset position via lower external debt and increased foreign
reserves. However, how the market — especially foreign investors — react to
debt restructurings need to be more thoroughly explored and constitute the
next step of our study.

12

A Figures and tables

Figure 1: Evolution of sovereign debt restructurings: Paris Club treatments
vs. Private sector involvement

13

 Source: Paris Club, Cruces and Trebesch (2014)   050,000100,000150,000200,000250,000300,000197819791980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013Paris Club TreatmentsPrivate Debt RestructuredFigure 2: Real GDP growth after a restructuring

Figure 3: Nominal vs. non-nominal: real GDP growth after a restructuring

14

Figure 4: Debt to nominal GDP ratio after a restructuring

Figure 5: Nominal vs. non-nominal: Debt to nominal GDP ratio after a
restructuring

15

Figure 6: Nominal vs. non-nominal: Debt amortisation (% GDP) after a
restructuring

Figure 7: Nominal vs. non-nominal: Debt interest payment (% GDP) after
a restructuring

16

Figure 8: Fiscal deﬁcit after a restructuring

Figure 9: Nominal vs. non-nominal: Fiscal deﬁcit after a restructuring

17

Figure 10: Nominal vs. high/low NPV relief: Fiscal deﬁcit after a restruc-
turing

Figure 11: Nominal vs. non-nominal: Non-debt related ﬁscal expenditure
(% GDP) after a restructuring

18

Figure 12: Nominal vs. non-nominal: trade balance (% GDP) after a re-
structuring

Figure 13: Nominal vs. non-nominal: capital account balance (% GDP) after
a restructuring

19

Figure 14: Nominal vs. non-nominal: Foreign reserves (% GDP) after a
restructuring

20

Table 1: Evolution of the terms of treatment with the Paris Club

Amount Treated Nominal Relief

Agreements
(billion US$) % Amount Treated NPV Relief per Country

Nominal relief

Number

of Agreements Countries

Ad Hoc
Classic
Toronto
Houston
London
Naples
Naples 50Lyon
Cologne
HIPC Exit
Total

33
165
28
35
26
47
7
39
36
422

25
58
20
21
23
33
5
32
36
86

(billion US$)
238.9
153.9
6.1
72.0
8.6
31.6
6.0
24.2
36.8
581.2

53.5
0.0
0.0
0.0
0.0
8.4
0.9
6.0
24.0
93.1

22.4
0.0
0.0
0.0
0.0
26.7
15.1
24.9
65.3
16.0

-
0.0
0.3
0.0
0.5
0.7
0.8
0.9
-

1.3
2.8
1.4
1.7
1.1
1.4
1.4
1.2
1.0
4.9

Table 2: Diﬀerences in real GDP growth: high vs. low NPV relief relative to
nominal haircut [t-statistic in parentheses]

(1)
t
0.092
(1.406)
0.104∗∗
(2.188)
8218

(2)
t+1
0.265
(1.627)
0.374∗∗∗
(3.101)
8218

(3)
t+2
0.468
(1.484)
0.726∗∗∗
(3.267)
8218

(4)
t+3
0.708
(1.375)
1.105∗∗∗
(3.146)
8218

(5)
t+4
0.970
(1.291)
1.468∗∗∗
(2.944)
8218

(6)
t+5
1.162
(1.205)
1.679∗∗∗
(2.643)
8218

(7)
t+6
1.358
(1.202)
1.786∗∗
(2.376)
8218

(8)
t+7
1.486
(1.167)
1.817∗∗
(2.107)
8218

Nominal - High NPV

Nominal - Low NPV

Observations

Table 3: Diﬀerences in debt level (% GDP): high vs. low NPV relief relative
to nominal haircut [t-statistic in parentheses]

(1)
t

(2)
t+1

(3)
t+2
Nominal - High NPV −0.518∗ −1.713∗∗ −3.099∗∗ −5.086∗∗ −7.271∗∗ −9.558∗∗ −11.913∗∗
(−2.033)
(−2.168)

(8)
t+7
−14.227∗
(−1.929)
Nominal - Low NPV −0.376∗∗ −1.366∗∗∗ −2.641∗∗∗ −4.500∗∗∗ −6.679∗∗∗ −9.061∗∗∗ −11.408∗∗∗ −13.725∗∗∗
(−2.713)
8202

(−2.800)
8204

(−2.686)
8214

(−2.175)
8216

(−2.635)
8212

(−2.843)
8208

(−2.792)
8210

(−2.845)
8206

Observations

(−2.302)

(−1.895)

(−2.170)

(−2.194)

(−2.103)

(4)
t+3

(5)
t+4

(7)
t+6

(6)
t+5

21

Table 4: Diﬀerences in ﬁscal deﬁcit (% GDP): high vs. low NPV relief relative
to nominal haircut [t-statistic in parentheses]

(1)
t

Nominal - Low NPV

Nominal - High NPV 0.046
(0.834)
0.054
(1.230)
8135

Observations

(2)
t+1
0.155
(0.956)
0.151
(1.237)
8052

(3)
t+2
0.282
(0.871)
0.239
(0.956)
7969

(4)
t+3
0.439
(0.867)
0.306
(0.765)
7886

(5)
t+4
1.059∗∗
(2.358)
0.650
(1.482)
7803

(6)
t+5
1.231∗∗
(2.129)
0.710
(1.239)
7720

(7)
t+6
1.445∗∗
(2.006)
0.837
(1.208)
7637

(8)
t+7
1.832∗∗
(2.073)
1.115
(1.344)
7554

22

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