Sovereign Debt Restructurings

Sovereign debt crises involve restructurings characterized by a mix of face value haircuts and maturity extensions. The prevalence extensions has been hard to reconcile with economic theory. We develop model endogenous restructuring that captures key facts sovereign episodes. While dilution pushes for negative extensions, three factors are important in overcoming the effects generating upon restructurings: income recovery after default, credit exclusion restructuring, regulatory costs book haircuts. employ dynamic discrete choice methods allow smoother decision rules, rendering problem tractable. (JEL E44, F34, F41, H63)