Sovereign Debt:   A Guide for Economists and Practitioners

September 13-14, 2018

This conference is designed to showcase and support the development of a new book - Sovereign Debt: A Guide for Economists and Practitioners – edited by S. Ali Abbas (IMF), Alex Pienkowski (IMF) and Kenneth Rogoff (Harvard University). The conference will be hosted by the International Monetary Fund at its headquarters in Washington DC on September 13-14, 2018.

The forthcoming book from Oxford University Press and the IMF is designed to connect the multiple aspects of sovereign debt policy into one coherent text. It will be accessible to policymakers and practitioners and will combine economic theory and analysis with real world examples of how this relates to actual events and policies. The editors have gathered together some of the leading experts in the field of sovereign debt as chapter authors and conference participants.

Agenda

Day 1—September 13, 2018

8:30-9:00

Coffee and pastries will be served

9:00-9:10

Opening Remarks

Christine Lagarde, Managing Director, IMF

9:10-10:10

Session 1: Public Debt Through the Ages

This introductory chapter will focus on the first era of Globalization (1880-1913) and the Twentieth Century.  It will cover the broad trends in the level and composition of debt, with case studies of major global events such as the world wars, the Great Depression and the Great Recession. A discussion of the Latin American Debt Crisis, the HIPC Initiative, and the Euro Area Debt Crises, along with their resolution, will conclude the chapter.

Chapter authors: Barry Eichengreen (Berkeley), Asmaa Adel El-Ganainy (IMF), Rui Pedro Esteves (Geneva), Kris Mitchener (Santa Clara)

Presenter: Barry Eichengreen (Berkeley)

Discussants:

  • Mark Flandreau (Pennsylvania)
  • Michael Bordo (Rutgers)
10:10-11:10

Session 2: The Current Landscape

Comparisons of public debt across countries and across time are hindered by the significant heterogeneity in definition and coverage. Public debt in France in 1830 bears very little resemblance to that of Brazil in 2016. This chapter will consider what constitutes a debt contract and onion-like layers of the sovereign entity. The chapter will use this taxonomy to show the varied landscape of debt today, in particular - who are the major creditors and debtors; what is the legal basis of the debt issued, what are the main financing instruments; and what are the terms of the bond.

Chapter authors: Serkan Arslanalp (IMF), Wolfgang Bergthaler (IMF), Phil Stokoe (IMF), Alexander Tieman (IMF)

Presenter: TBD

Discussants:

  • Olivier Jeanne (Johns Hopkins)
  • Raphael Molina (Newstate Partners)
11:10-11:30

Coffee break

11:30-12:30

Session 3: The Motive to Borrow

Debt levels around the world are much higher than can be explained by simply the motive to smooth incomes and consumption through the business cycle. This chapter will explore why debt can rise to levels that make many uncomfortable; and in the process, better understand the extent to which these (other) motives to borrow serve the welfare of a country’s citizens. It will look at the role of debt to generate future growth (infrastructure, education) and to destroy wealth, in the form of war. It will look at myopic decision makers and the risk of over-borrowing.

Chapter authors: Antonio Fatas (INSEAD), Rex Ghosh (IMF), Ugo Panizza (Geneva), Andrea Presbitero (IMF)

Presenter: Ugo Panizza (Geneva)

Discussants:

  • Richard Hughes (HM Treasury)
  • Paolo Mauro (IMF)
12:30-14:00

Conference Lunch (by invitation only)

14:00-15:00

Session 4: Debt Sustainability

Why can Japan sustain debts above 200 percent of GDP, while Ukraine defaulted on its debt when it was 30 percent of GDP? This chapter will investigate what factors increase the likelihood of a country defaulting; equivalently, how to assess the sustainability of sovereign debt. It will provide a comprehensive overview of the knowns and unknowns of debt sustainability, including the range of tools available to understand vulnerabilities and inform what will always remain a difficult judgment call. These include the IMF’s DSA framework, and market information and indicators (bond and CDS spreads and sovereign ratings). As the risk of default is not zero, the chapter will also review models of debt limits explaining why a government may find itself to be either unable or unwilling to face its obligations when debt exceeds certain levels.

Chapter authors: Xavier Debrun (IMF), Jonathan Ostry (IMF), Tim Willems (IMF), Charles Wyplosz (Geneva)

Presenter: Xavier Debrun (IMF)

Discussants:

  • Doug Elmendorf (Harvard)
  • Elena Duggar (Moody’s)
15:00-16:00

Session 5: Debt Management

This chapter will explore the role of debt managers in reducing risks to debt sustainability. The chapter will begin with the primary objective of debt management, i.e. the minimization of cost of debt, subject to an acceptable level of risk; but then cover bigger picture motives, such as the allocation of risk between the public and private sector, especially in the context of an economy-wide shock. It will also discuss how the composition of sovereign debt can have important macroeconomic implications, such as via the monetary policy transmission mechanism. The chapter will detail the risks from maturity, currency and residency, including the ‘original sin’ problem faced by some countries.

Chapter authors: Michael Bordo (Rutgers), Thordur Jonasson (IMF), Chris Meissner (UC Davis), Michael Papaioannou (IMF), Mike Williams (independent consultant)

Presenter: TBD

Discussants:

  • Jill Dauchy (Potomac Group)
  • Michael Gapen (Barclays)
16:00-16:20

Coffee break

16:20-17:20

Panel Discussion: Challenges Ahead

The final chapter of the book will identify the main sovereign debt issues for the next decade or so. It will focus on three mains areas. First, the blurring boundary between domestic and external debt, and the implications thereof for debt management, debt sustainability and the political economy of default vs. consolidation. Second, it will discuss the re-indebtedness of low-income countries, and implications for policies to prevent/manage situations of overborrowing. Third, the role of innovative financial instruments – such as sate-contingent debt – to better manage risks on a sovereign’s balance sheet. Fourth, the emergence of new lenders and new financial products, covering both the complications associated with resolving the next wave of debt crises, the responsibilities on creditors, as well as the opportunities for financing development.

Chapter authors: Hugh Bredenkamp (IMF), Ricardo Hausmann (Harvard), Carmen Reinhart (Harvard)

Presenter: Hugh Bredenkamp (IMF)

Moderator: David Lipton, First Deputy Managing Director, IMF

Panelists:

  • Barry Eichengreen (Berkeley),
  • Ricardo Hausmann (Harvard)
  • Carmen Reinhart (Harvard)
  • Ken Rogoff (Harvard)
19:00-21:30

Conference Dinner (by invitation only)

Day 2—September 14, 2018

8:30-9:00

Coffee and pastries

9:00-10:00

Session 6: Reducing Debt, Short of Default

If debt is too high, what policies are available to governments to reduce it? This chapter will go through all options, short of default. It will begin by introducing the standard debt accumulation equation, noting the key relationships, such as the growth-interest rate differential; and inter-temporal dynamics. Once this is established, the more conventional strategies for reducing debt – promoting growth and fiscal consolidation – will be explored. The chapter will then move on to more unconventional policies, such as using the central bank’s balance sheet and the role of financial repression. There will also, inevitably, need to be a discussion of how these various options come together in a strategy, learning from history, especially the post-WW2 debt consolidations.

Chapter authors: Tom Best (IMF), Oliver Bush (LSE), Luc Eyraud (IMF), Belen Sbrancia (IMF)

Presenter: Oliver Bush (LSE)

Discussants:

  • Antonio Fatas (INSEAD)
  • Margaret Jacobson (Indiana)
10:00-11:00

Session 7: Sovereign Default

This chapter will begin by conceptualizing sovereign default and debt distress and by untangling the various forms of default. It will briefly discuss the determinants of default, focusing on domestic, legal and external variables. Much of the chapter will then explore the various costs of sovereign default, and the factors that that influence this. It will also look at ways to reduce the costs of default and distress as well as the weaknesses and distortions within the existing framework of crisis prevention and resolution. This includes the role of official sector lending policies, domestic politics, creditor identity and the character of the debt.

Chapter authors: Julianne Ams (IMF), Reza Baqir (IMF), Anna Gelpern (Georgetown), Christoph Trebesch (Kiel)

Presenter: TBD

Discussants:

  • Lorenzo Giorgianni (Tudor Group)
  • Graciela Kaminsky (George Washington)
11:00-12:00

Session 8: The Restructuring Process

This Chapter will discuss the process of restructuring a sovereign’s debt once the decision has been made that this step is inevitable, and the various factors that come into play in determining the scope, strategy, and resolution of the restructuring.

Chapter authors: Lee Buchheit (Cleary Gottlieb), Chanda DeLong (IMF), Guillaume Chabert (Tresor), Jeromin Zettelmeyer (Peterson)

Presenter: Lee Buchheit (Cleary Gottlieb)

Discussants:

  • Natalie Jaresko (Financial Oversight and Management Board for Puerto Rico)
  • Elena Daly (EM Conseil)