Citation

Discussion Paper Details

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Title: The Seniority Structure of Sovereign Debt

Author(s): Matthias Schlegl, Christoph Trebesch and Mark L. J. Wright

Publication Date: April 2019

Keyword(s): Arrears, IMF, Insolvency, International financial architecture, official debt, Pecking order, priority, Sovereign bonds and sovereign default

Programme Area(s): Financial Economics and International Macroeconomics and Finance

Abstract: Sovereign governments owe debt to many foreign creditors and can choose which creditors to favor when making payments. This paper documents the de facto seniority structure of sovereign debt using new data on defaults (missed payments or arrears) and creditor losses in debt restructuring (haircuts). We overturn conventional wisdom by showing that official bilateral (government-to-government) debt is junior, or at least not senior, to private sovereign debt such as bank loans and bonds. Private creditors are typically paid first and lose less than bilateral official creditors. We confirm that multilateral institutions like the IMF and World Bank are senior creditors.

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Bibliographic Reference

Schlegl, M, Trebesch, C and Wright, M. 2019. 'The Seniority Structure of Sovereign Debt'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13692