Abstract
The process of financing foreign Governments is referred to as Sovereign lending. These have existed since the middle ages. At some point the debt passed from the backing of the king himself to that of the kingdom; and in the nineteenth century from the kingdom to the independent republics. The modern concept of Sovereign lending refers to Republics who use tax money to pay back loans. The Sovereign is ultimately the tax payer, yet the responsibility belongs to the elected Government. The sovereign debtor is the republic. Historically there are recurring events that lead countries to not meeting their obligations on time. This is referred to as Sovereign Default if the non-payment lasts more than 30 days from the due date. Sovereign loans are extended by multilateral banks (e.g. World Bank, Asian Development Bank, Inter-American Development Bank); bilaterally as Government to Government loans; through international bond issues; by commercial banks and by Government suppliers. The default resolution includes different treatments for each, leading to a situation where some creditors may become beneficiary of the default to others. There has been a history of attempting to create a Board of Arbitration for Sovereign Debt since the League of Nations. The most recent was in the United Nations General Assembly in 2014. The absence of one such mechanism can lead to abuses by some creditor who benefits from the concessions of the rest, as the Argentine case of 2014 showed.
This is a preview of subscription content, log in via an institution to check access.
Bibliography
Ams, J., R. Baqir, A. Gelpern, and C. Trebesch. 2019. Sovereign default. Chapter 7. In Sovereign debt: A guide for economists and practitioners, ed. S. Ali Abbas, A. Pienkowski, and K. Rogoff. Oxford University Press. Forthcoming.
Abbas, S. Ali, A. Pienkowski, and K. Rogoff, eds. 2019. Sovereign debt: A guide for economists and practitioners. Oxford University Press. Forthcoming.
Asonuma, T. 2016. Serial sovereign defaults and debt restructurings. IMF working paper WP/16/65, March.
Beers, D.T., and J.S. Nadeau. 2015. Database of sovereign defaults, 2015. Technical report no. 101/rapport technique no 101, Bank of Canada.
Borensztein, E., and U. Panizza. 2008. The costs of sovereign default. IMF working paper WP/08/238, October.
Buchheit, L., and M. Gulati. 2002. Sovereign bonds and the collective will. Emory Law Journal 51 (1317): 1324–1325.
Buchheit, L., and M. Gulati. 2011. Drafting a model collective action clause for Eurozone sovereign bonds. Capital Markets Law Journal 6 (3): 317–325.
Bulow, J., and K. Rogoff. 1989. Sovereign debt: Is to forgive to forget? The American Economic Review 79 (1): 43–50.
Cantor, R., and F. Packer. 1996. Determinants and impact of sovereign credit ratings. FRBNY Economic Policy Review/October.
Deney, N. 1967. L’Égypte et la Compagnie universelle du canal maritime de Suez. Revue française de science politique 17–2: 293–299.
Drake, P. 1989. Money doctors in the Andes, the Kemmerer missions, 1923–1933. Duke University Press.
Eaton, J., and M. Gersovitz. 1981. Debt with potential repudiation: Theoretical and empirical analysis. The Review of Economic Studies 48 (2): 289–309. Retrieved from http://www.jstor.org/stable/2296886.
Felix, D. 1990. Desenlaces alternativos de la crisis deudora latinoamericana: lecciones del pasado. Investigación Económica 49 (192): 45–108. Retrieved from http://www.jstor.org/stable/42778307.
Flandreau, M., and Ugolini, S. (2013). Where it all began: lending of last resort and Bank of England monitoring during the Overend-Gurney panic of 1866 (pp. 113–161). Cambridge University Press.
Ford, A.G. 1956. Argentina and the Baring Crisis of 1890. Oxford Economic Papers 8 (2): 127–160. https://doi.org/10.1093/oxfordjournals.oep.a042258.
Guzman, M. 2016. Reestructuración de deuda soberana en una arquitectura financiera-legal con huecos. Rev. Jur. UPR, 85, 611.
Guzman, M., Ocampo, J. A., and Stiglitz, J. E. (Eds.). (2016). Too little, too late: The quest to resolve Sovereign debt crises. Columbia University Press.
IMF, Independent Evaluation Office (IEO). 2003. The role of the IMF in Argentina, 1991–2002, July.
Levy Yeyati, E., and U. Panizza. 2011. The elusive costs of sovereign defaults. Journal of Development Economics 94 (1): 95–105.
Luxembourg, R. 1923. English 1951. Die akkumulation des kapitals. Editorial: Vereinigung internationaler verlags-anstalten g.m.b.h., Berlin. In The accumulation of capital, ed. W. Dr. Stark. London: Routledge and Kegan Paul Ltd.
Marichal, C. 2013. Nueva historia de las grandes crisis financieras: Una perspectiva global. México: Random House Mondadori.
Miller, R. 1976. The Making of the Grace contract: British Bondholders and the Peruvian Government, 1885–1890. Journal of Latin American Studies 8 (1): 73–100.
Moulton, H.G., and L. Pasvolsky. 1926. World war debt settlements. New York: The MacMillan Company.
Ozler, S. 1992. Have commercial banks ignored history? NBER, working paper, 3959, January.
Perry, G., and L. Serven. 2003. The anatomy of a multiple crisis. Why was Argentina special and what can we learn from it? Policy research working paper 3081, the World Bank, Latin America and the Caribbean region, Office of the Chief Economist, June.
Radin, M. 1935. Maintenance by Champerty. California Law Review 24 (1): 48–78.
Rose, A.K. 2005. One reason countries pay their debts: Renegotiation and international trade. Journal of Development Economics 77 (1) June: 189–206.
Reinhart, C., V. Reinhart, and M. Savastano. 2003. Debt Intolerance, NBER Working paper 9908. http://www.nber.org/papers/w9908
Sturzenegger, F., and J. Zettelmeyer. 2006. Debt defaults and lessons from a decade of crises. Cambridge, MA: MIT Press.
Ugarteche, O. 2014/2018. Arquitectura Financiera Internacional: una genealogÃa 1850–2015. México: AKAL.
Vernengo, M. 2014. Argentina, vulture funds, and the American justice system. Challenge 57 (6): 46–55. https://doi.org/10.2753/0577-5132570604.
Weidemaier, M., and M. Gulati. 2013. A People’s history of collective action clauses. University of North Carolina School of Law, Carolina Law Scholarship Repository.
Williams, J.H. 1920. Argentine international trade under inconvertible paper money 1880–1900. Harvard University Press.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Section Editor information
Copyright information
© 2021 The Author(s), under exclusive license to Springer Nature Limited
About this entry
Cite this entry
Ugarteche, O. (2021). Sovereign Default. In: Vernengo, M., Caldentey, E.P., Rosser Jr, B.J. (eds) The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_3102-1
Download citation
DOI: https://doi.org/10.1057/978-1-349-95121-5_3102-1
Received:
Accepted:
Published:
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-95121-5
Online ISBN: 978-1-349-95121-5
eBook Packages: Springer Reference Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences