A further examination of sovereign domestic and external debt defaults

Abstract

Theoretical and empirical studies have generally ignored interactions between political, economic and financial factors, in determining or predicting external sovereign debt defaults across geographic clusters. In addition, investigating and predicting defaults on domestic debt is relatively uncommon. This study looks into both domestic and external debt defaults of sovereign countries from diverse regions by interacting political, financial and economic factors and draws broad conclusions that domestic and sovereign debt defaults share some common features, although significant heterogeneities also exist. The findings of this study have significant policy implications in predicting and managing sovereign domestic and external debt defaults.