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RESEARCH PRODUCT
The Legacy and the Tyranny of Time: Exit and Re-Entry of Sovereigns to International Capital Markets
Ricardo M. SousaVitor CastroLuca Agnellosubject
Economics and EconometricsGovernment050208 financeHaircutCreditormedia_common.quotation_subject05 social sciencesSettore SECS-P/02 Politica EconomicaDuration dependenceDebtorMonetary economicsInternational capital marketMarket economyAccounting0502 economics and businessEconomicsinternational capital markets re-entry and exit continuous-time Weibull model duration dependence change-point.050207 economicsDuration (project management)FinanceReputationmedia_commondescription
We use a novel continuous-time Weibull model (without and) with a change-point in the duration dependence parameter to investigate the duration of the exit and re-entry of sovereigns to international capital markets. Relying on annual data for a large panel of countries over the period 1970-2011, we find that, as the reputation of debtor countries as good (bad) borrowers solidifies over time, those episodes are more likely to end - i.e. the "legacy of time". Debtor countries can take advantage of the "benefit of doubt" of creditors during short exit spells. However, when exits are long and the reputation as a bad borrower emerges, no more "complacency" makes it more difficult for them to borrow again in international capital markets - i.e. the "tyranny of time". We also find that: (i) government stability and multilateral financial assistance play a crucial role; (ii) the dynamics of the duration of exit (re-entry) spells is robust to the presence of default episodes, the default length and the haircut size; and (iii) exit and re-entry have shortened over time.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2018-05-16 | Journal of Money, Credit and Banking |