ABSTRACT

 

A main puzzle in the sovereign debt literature is that defaults have only minor effects on subsequent borrowing costs and access to credit. This paper comes to a different conclusion. We construct the first complete database of investor losses (“haircuts”) in all restructurings with foreign banks and bondholders from 1970 until 2010, covering 180 cases in 68 countries. We then show that restructurings involving higher haircuts are associated with significantly higher subsequent bond yield spreads and longer periods of capital market exclusion. The results cast doubt on the widespread belief that credit markets “forgive and forget.”

• “Statistical Properties of Country Credit Ratings”, Emerging Markets Review, 7(1): 27-51, March 2006.

ABSTRACT

The country credit rating is a key covariate of the cost and availability of international financing for an economy. This paper models ratings as a function of expected repayment capacity, derives empirical implications, and tests them using the most comprehensive consistent series of sovereign credit ratings. These are the Institutional Investor ratings which have been widely used in the international finance literature. We report several stylized facts: volatility clustering, asymmetric adjustments, and serial correlation in credit revisions, especially in Emerging countries.  These features are consistent with rational behavior of credit rating teams and have important implications in assessing the long term risk of international investments.

• ¿CÓMO RESOLVER EL PROBLEMA DE LOS HOLD-OUTS Y BAJAR EL COSTO DE CAPITAL DE LA ECONOMÍA ARGENTINA?
  
  SÍNTESIS
  
  El objetivo de este documento de divulgación es hacer un aporte para comprender de manera balanceada la crisis con los hold-outs y formular una política sobre deuda soberana conveniente para Argentina. Para ello, primero se analizan los aspectos económicos de los créditos riesgosos y los determinantes del riesgo país, se caracterizan los tipos de inversores en estos mercados y se muestra la evolución de la calidad crediticia de gobiernos latinoamericanos en los últimos 30 años. Luego se pasa revista a los aspectos jurídicos de la reestructuración de deudas soberanas bajo ley inglesa y estadounidense y a cómo han evolucionado los juicios para arbitrar diferendos entre deudores y acreedores desde 1976. Se comparan aspectos salientes de nuestra reestructuración de 2005 con todas las otras reestructuraciones de deuda de países de ingresos medios ocurridas entre 1998 y 2013. Por último, se sintetizan investigaciones sobre el subconjunto de reestructuraciones que han enfrentado juicios de acreedores disidentes (o sea hold-outs, ya sean buitres o no buitres que también litigaron) y se hace una cronología de nuestros juicios. Se concluye con los lineamientos generales de una propuesta que cumpla el objetivo planteado. 
  
  LECTURA EXPRESS: Esta presentación sintetiza la comparación de nuestra reestructuración de 2005 con todos los canjes posteriores al Plan Brady y la parte propositiva del documento.
  
  

• GRADING LATIN AMERICAN PRESIDENTS: A VIEW FROM THE STOCK MARKETS
  
  Joint with Javier García-Cicco (Central Bank of Chile and Universidad Católica Argentina) 
  
  ABSTRACT
  
  We propose a novel approach to grade presidential economic performance using stock returns. In efficient markets, asset prices are unique in that they impound the long term effects of changes in the environment, including government policy.  To purge national returns of state-of-the-world conditions that do not result from local events, we introduce a global twin portfolio and a regional return.  The twin portfolio for a country reports the return of a combination of world stocks that each month has the same industrial composition as that one country’s stock index.  These benchmark external conditions are most volatile: they vary between a 295% appreciation (or tailwind under some interpretations) and a 30% reduction (or headwind) in asset prices over extreme four-year presidencies in our sample.  We interpret the gap of national performance over these counterfactual returns as a proxy for the quality of domestic policies during a given presidency, as seen from the standpoint of equity investors.  We apply this approach to seven Latin American countries from 1980 until 2011.  From this perspective, Colombia, Peru and Chile stand out as the countries that have implemented the best long run policies over the sample.  In addition, we provide a grading of relative presidential performance.
  
  Aplicación: COPA AMÉRICA BURSÁTIL (LATIN AMERICAN STOCK MARKET CUP)