Sovereign Debt Repatriation During Crises

IMF Working Papers, May 6, 2022

Source details

Authors: Serkan Arslanalp, Laura Sunder-Plassmann
Date: May 6, 2022
Core result: Using a new, comprehensive data set on the sovereign debt investor base, the paper documents three novel empirical facts about sovereign debt investor dynamics around crises.

(i) Sovereign debt is repatriated—that is, shifted from external private to domestic investors—prior to sovereign defaults.
(ii) Not all crises are equal: evidence for repatriation during banking and currency crises is more limited.
(iii) The nature of defaults matters: external investors do not leave during preemptive debt restructurings.
Additional pattern: Repatriation appears to be prevalent when defaults happen in large markets with low capital controls.

Data set: A new, comprehensive investor-base data set suited to analyzing investor base dynamics during rare crises.
Coverage: 180 countries from 1989 to 2020.
Time series and cross-section strength: Emphasized as uniquely suited for studying investor-base dynamics in rare crisis episodes.

The observed repatriation behavior is specifically linked to sovereign defaults and varies by crisis type and restructuring approach.
Market characteristics (market size and capital control intensity) are associated with the prevalence of repatriation.

Subject: Currency crises, Debt default, External debt, Financial crises, National accounts, Private debt, Public debt
Keywords: analyzing investor base dynamics, Banking crisis, Capital flows, Caribbean, Currency crises, Currency crisis, Debt default, debt maturity, External debt, external investor, Financial crisis, Global, investor base, investor database, Private debt, Sovereign debt, Sovereign default

IMF Working Paper — Serkan Arslanalp and Laura Sunder-Plassmann, "Sovereign Debt Repatriation During Crises", May 6, 2022.