One reason countries pay their debts
Subtitle: renegotiation and international trade
By: Andrew K. Rose.
Contributors: Federal Reserve Bank of New York.
Series: Staff reports ;; no. 142; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 142.
Publisher: Federal Reserve Bank of New York
Published: 2001
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Subjects: Debts, External.; Debt relief.; International trade.; Repudiation.; International economic integration.
Description: "This paper estimates the effect of sovereign debt renegotiation on international trade.  Sovereign default may be associated with a subsequent decline in international trade either because creditors want to deter default by debtors, or because trade finance dries up after default.  To estimate the effect, I use an empirical gravity model of bilateral trade and a large panel data set covering fifty years and more than 200 trading partners.  The model controls for a host of factors that influence bilateral trade flows, including the incidence of International Monetary Fund programs.  Using the dates of sovereign debt renegotiations conducted through the Paris Club as a proxy measure for sovereign default, I find that renegotiation is associated with an economically and statistically significant decline in bilateral trade between a debtor and its creditors.  The decline in bilateral trade is approximately 8 percent a year and persists for about fifteen years"--Federal Reserve Bank of New York web site.
Notes: Includes bibliographical references.
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