Essays on sovereign borrowing and default

• Autores: María Bru Muñoz
• Directores de la Tesis: Hernan D. Seoane (dir. tes.)
• Lectura: En la Universidad Carlos III de Madrid ( España ) en 2022
• Idioma: inglés
• Tribunal Calificador de la Tesis: Almuth Scholl (presid.), Beatriz de Blas Pérez (secret.), Marina Vukotic (voc.)
• Programa de doctorado: Programa de Doctorado en Economía por la Universidad Carlos III de Madrid
• Materias:
  • Ciencias económicas
    • Economía internacional
      • Financiación internacional
• Enlaces
  • Tesis en acceso abierto en: e-Archivo
• Resumen

  • There is a growing interest among macroeconomists about the effects that borrowing from official lenders may have on the overall debt dynamics, and on sovereign default in particular. These lenders are particularly important in developing countries, although they have become also relevant for advanced economies in recent years. My dissertation consists of two chapters that aim at contributing to the research on the role of official lenders on sovereign debt and default, and particularly on how the financing by these lenders may affect the traditional DSGE sovereign default model.

    In the first chapter, ‘Financial Exclusion and Sovereign Default: The Role of Official Lenders’, I explore whether financial autarky after default is a relevant driver of sovereign default incentives. I find new evidence that suggests that this is not the case, and that there are substantial differences in the behavior of different lenders after a sovereign default. Private lenders tend to decrease their funding to developing countries that have defaulted to banks or to the Paris Club. But the financing from official creditors, i.e. bilateral and multilateral, remains mainly unaffected by the different sovereign defaults, only with some exceptions mostly related to defaults to multilateral lenders. This different pattern for official financing is very relevant since official loans are the main source of funds for developing economies. Official creditors continue offering funding to countries even after default, casting doubt on the relevance of one of the main assumptions in sovereign default models, the so-called financial exclusion.

    In the second chapter, ‘The Forgotten Lender: The Role of Multilateral Lenders in Sovereign Debt and Default’, I analyze the traditionally overlooked multilateral lenders and their role in sovereign default. These creditors represent a significant share in emerging markets lending and feature very distinct characteristics, such as lower interest rates or seniority. By including these creditors in a traditional DSGE model of sovereign default, I am able to reproduce the high debt levels found in the data, while maintaining default probabilities within realistic values. Additionally, I am able to analyze the role of multilateral debt in emerging economies. Multilateral loans fulfill the role of a complement financing to private funds, improving the lack of completeness of international financial markets. Also, multilateral funding acts as an insurance mechanism in bad times, providing countries with some degree of consumption-smoothing, opposite to the role of front-loading consumption that private funding meets.