Sovereign debt restructurings are often resolved through maturity extensions. Using a new dataset that classifies restructuring episodes by negotiation type, I show that restructurings concluded under IMF programs feature larger maturity extensions at settlement, higher haircuts, and faster returns to international credit markets than those negotiated directly with creditors. I develop a model of sovereign default with endogenous debt maturity and two negotiation regimes, in which governments can restructure either directly or under an IMF program imposing fiscal conditionality. Conditionality reduces debt accumulation and raises long-bond prices by mitigating dilution incentives. It therefore acts as a commitment device for fiscal adjustment, leading to longer debt maturities following restructuring.
This paper examines the interaction between the currency denomination of sovereign debt and the composition of its holders. We document that, in emerging economies, local-currency bonds constitute the main instrument of government debt and are predominantly held by domestic investors. We develop a framework that characterizes the trade-offs governments face when domestic and foreign demand for bonds respond differently to policy changes. Domestic investors prefer local-currency bonds because these assets provide insurance against distortionary taxation. The government internalizes how currency denomination influences domestic demand and default risk, generating a novel endogenous link between the composition of bondholders and the choice of currency. Even abstracting from the standard hedging benefits against output fluctuations, it remains optimal for the government to issue local-currency debt to stimulate domestic demand, consistent with empirical evidence. Finally, we show that imposing minimum domestic holdings of foreign-currency bonds through financial repression can implement the optimal allocation without relying on local-currency issuance.
In the context of debt restructuring processes, the involvement of third parties in renegotiations is frequent. This paper analyzes the participation of such third parties. I construct a comprehensive sovereign debt dataset that encompasses IMF involvement in restructuring processes from 1970 until 2014, covering a total of 189 cases across 71 countries. The findings from this analysis reveal that restructurings within an IMF program present larger haircuts for the sovereign and quicker returns to credit markets. This paper develops a small open economy model that incorporates the possibility of third-party-mediated agreements during the negotiation process with lenders. The model captures the high average debt service-to-output ratio and elevated spreads observed in Argentina. The model also accounts for other cyclical patterns observed within the country.
This paper studies how loan structure shapes housing and default outcomes for lower-income households in the manufactured housing market. Manufactured homes are the largest source of unsubsidized affordable housing in the United States, but financing depends on land tenure. Households without land typically rely on chattel loans, which feature higher interest rates, shorter maturities, and lower loan-to-value limits than traditional mortgages. I document empirical patterns that highlight key frictions in manufactured housing finance. To interpret these patterns, I develop a dynamic model of housing choice with income risk, borrowing constraints, and default. The model is used to study how differences in loan terms shape homeownership decisions and default behavior.