10.17889/E109061
Chatterjee, Satyajit
Eyigungor, Burcu
Replication data for: A Seniority Arrangement for Sovereign Debt
ICPSR Inter-university Consortium for Political and Social Research
2014
10.1257/aer.20130932
10.1257/aer.20130932
V0
A sovereign's inability to commit to a course of action regarding future borrowing and default behavior makes long-term debt costly (the problem of debt dilution). One mechanism to mitigate this problem is the inclusion of a seniority clause in debt contracts. In the event of default, creditors are to be paid off in the order in which they lent (the \"absolute priority\" or \"first-in-time\" rule). In this paper, we propose a modification of the absolute priority rule suited to sovereign debts contracts and analyze its positive and normative implications within a quantitatively realistic model of sovereign debt and default. (JEL E32, E44, F34, G15, H63, O16, O19)