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Title: The legacy and the tyranny of time: exit and re-entry of sovereigns to international capital markets
Authors: Agnello, Luca
Castro, Vitor
Sousa, Ricardo M.
Keywords: International capital markets
Entry and exit
Continuous-time Weibull model
Duration dependence
Change-point
Issue Date: 2017
Publisher: Wiley
Citation: AGNELLO, L., CASTRO, V. and SOUSA, R.M., 2017. The legacy and the tyranny of time: exit and re-entry of sovereigns to international capital markets. Journal of Money, Credit and Banking, In Press.
Abstract: We use a novel continuous-time Weibull model (without and) with a change-point in the duration dependence parameter to investigate the duration of the exit and re-entry of sovereigns to international capital markets. Relying on annual data for a large panel of countries over the period 1970-2011, we find that, as the reputation of debtor countries as good (bad) borrowers solidifies over time, those episodes are more likely to end - i.e. the "legacy of time". Debtor countries can take advantage of the "benefit of doubt" of creditors during short exit spells. However, when exits are long and the reputation as a bad borrower emerges, no more "complacency" makes it more difficult for them to borrow again in international capital markets - i.e. the "tyranny of time". We also find that: (i) government stability and multilateral financial assistance play a crucial role; (ii) the dynamics of the duration of exit (re-entry) spells is robust to the presence of default episodes, the default length and the haircut size; and (iii) exit and re-entry have shortened over time.
Description: This paper is closed access until 24 months after the date of publication.
Sponsor: Castro and Sousa acknowledge that this work was carried out within the funding with COMPETE reference nº POCI-01-0145-FEDER-006683, with the FCT/MEC's (Fundacao para a Ciencia e Tecnologia, I.P.) financial support through national funding and by the ERDF through the Operational Programme on "Competitiveness and Internationalization - COMPETE 2020" under the PT2020 Partnership Agreement.
Version: Accepted for publication
URI: https://dspace.lboro.ac.uk/2134/26418
Publisher Link: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1538-4616
ISSN: 0022-2879
Appears in Collections:Closed Access (Economics)

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