Denouncing Odious Debts

Collet, Stéphanie; Oosterlinck, Kim

doi:10.1007/s10551-018-3865-7

Cited by 8 publications

(2 citation statements)

References 62 publications

(52 reference statements)

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“…The debts which had been issued against the interest of the Indian population should not be repaid once independence would be achieved. Previous studies (Collet, 2013;Collet & Oosterlinck, 2019;Gulati & Panizza, this volume) have shown that markets react when debts are denounced as odious. An increase in the perception that India might repudiate the debt could thus translate into higher yields.…”

Section: Indian Independence Pressuresmentioning

confidence: 98%

Independence and the Effect of Empire

Degive¹,

Oosterlinck²

2021

Sovereign Debt Diplomacies

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‘Sovereign’ bonds issued by colonies are often supposed to benefit from an implicit imperial guarantee. This guarantee is usually presented as the main reason why yields on colonial bonds are exceptionally low. This paper investigates investors’ perception of this guarantee during the interwar period, a period during which the guarantor faced financial turmoil and some colonies began their journey towards independence. On the basis of an original database tracking the yields of six colonial bonds we show that, in general, market participants believed the guarantee would be honoured. This general observation needs, however, to be nuanced. In 1931 when Britain left the gold standard, investors felt the British guarantee was less valuable. Furthermore, when colonies were facing extreme financial distress, markets reassessed the likelihood the guarantee would be honoured. This was also the case when it became clear that India would become independent.

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Section: Indian Independence Pressuresmentioning

confidence: 98%

Independence and the Effect of Empire

Degive¹,

Oosterlinck²

2021

Sovereign Debt Diplomacies

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“…The result of the public outcry that followed was a sharp drop in the market value of that particular bond. See Collet & Oosterlinck (2019).…”

Section: Hunger Bonds and The Hausmann Effectmentioning

confidence: 99%

Maduro Bonds

Gulati¹,

Panizza²

2021

Sovereign Debt Diplomacies

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For multiple decades, activists have sought to institute an international legal regime that limits the ability of despotic governments to borrow money and then shift those obligations onto more democratic successor governments. The goal of this chapter is to raise the possibility of an alternate legal path to raising the costs of borrowing for despotic regimes. All countries have systems of domestic laws that regulate agency relationships and try to deter corruption; otherwise the domestic economy would not function. Despotic governments are especially likely to engage in transactions that are legally problematic, since by definition, they lack the support of the populace; meaning that there is a high likelihood that actions that they take on behalf of the populace can be challenged as unrepresentative and contrary to the interests of the true principals. The foregoing conditions, if one translates them into the context of an ordinary principal–agent relationship, would constitute a voidable transaction in most modern legal systems. That means that if opposition parties in countries with despotic governments today were to monitor and make public the potential problems with debt issuances by their despotic rulers under their own local laws, it would raise the cost of capital for those despots. To support our argument, we use both the concrete example of the debt issuance shenanigans of the Maduro government in Venezuela and a more general analysis of the relationship between corruption, democracy, and a nation’s borrowing costs.

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The War that Bond Markets Did not Perceive as Such

Oosterlinck

Gansbeke

2020

Springer Studies in the History of Economic Thought

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Denouncing Odious Debts

Cited by 8 publications

References 62 publications

Independence and the Effect of Empire

Independence and the Effect of Empire

Maduro Bonds

The War that Bond Markets Did not Perceive as Such

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