Mainstream View

IMF working paper: Trade Costs of Sovereign Debt Restructurings: Does a Market-Friendly Approach Improve the Outcome?

Abstract Sovereign debt restructurings have been shown to influence the dynamics of imports and exports. This paper shows that the impact can vary substantially depending on whether the restructuring takes place preemptively without missing payments to creditors, or whether it takes place after a default has occurred. We document that countries with post-default restructurings experience…


IMF working paper: Sovereign Defaults, External Debt, and Real Exchange Rate Dynamics

Abstract Emerging countries experience real exchange rate depreciations around defaults. In this paper, we examine this observed pattern empirically and through the lens of a dynamic stochastic general equilibrium model. The theoretical model explicitly incorporates bond issuances in local and foreign currencies, and endogenous determination of real exchange rate and default risk. Our quantitative analysis…