2006–2010

Why Does Sovereign Risk Differ for Domestic and External Debt? Evidence from Scandinavia, 1938–1948

Reprint No. 2010:6

Author(s): Daniel WaldenströmYear: 2010 Title: Journal of International Money and Finance Volume (No.): 29 (3) Pages: 387–402
Online article (restrictions may apply)


This study shows empirically that the political costs of sovereign default can differ considerably for domestic and external debt. The analysis uses new evidence from Danish and Swedish bond markets around World War II, a time when markets went from being fully integrated to fully segmented overnight. By linking the exogenous wartime shocks to changes in default costs on domestic and external debt, it is found that these costs explain a significant part of the variation in the sovereign yield spread across markets. The results suggest that governments can choose strategically on which debt, the domestic or the external, to default on, and that this decision hinges on the relative size of the political default costs.


Reference:
Waldenström, Daniel (2010), "Why Does Sovereign Risk Differ for Domestic and External Debt? Evidence from Scandinavia, 1938–1948". Journal of International Money and Finance 29(3), 387–402.

Daniel Waldenström

Contact

Ph: +33-754844839
Mob: +46 70 4916082
daniel.waldenstrom@if...

An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

Omslag 2017 Institutional Reform for Innovation and Entrepreneurship.jpg

The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

Events

Seminars organized by IFN

 

To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

Academically oriented seminars are most of the time held on Wednesdays at 10 am. At these events researchers from IFN and other institutions present their research.

In addition, IFN organizes seminars open to the public. Topics for these are derived from the IFN research.

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 | info@ifn.se