Research On Sovereign Debt Restructurings

Since the world’s three major credit rating agencies, including Fitch, standard&Poor’s and Moodie, have lowered Greece’s sovereign credit rating in October2009, the Greek debt crisis had kicked off. The crisis had a rapid expansion across Europe. Spain, Ireland, Portugal, Italy and other countries have been the outbreak of the debt crisis in succession. The Greek debt crisis evolved into the European debt crisis. Frequent the sovereign debt crisis has seriously affected the health of the development of the world economy and financial stability. Therefore, the method of Debt Settlement has become a focus in theoretical circles.Study on the sovereign debt crisis, can be traced back to the sovereign debt. Sovereign debt have positive significance on economic development or consumption stability, but improper use and debt accumulation would raise sovereign debt risk. Debt risk will result in debt default because of being accumulated to a certain extent, and thus lead to debt crisis. The most direct and effective way to solve the debt crisis is the debt restructuring. In this paper, based on the above logic thinking, study, on related problems of debt restructuring, has both theoretical and practical significance.The theoretical significance of this paper is:first, the internal default on debt of Default state from the theory analysis, the paper establishes mathematical model of debt in default state, with sanctions condition, reason still choose the default. Second, a debt restructuring framework proposed a theory can operate on contingent liabilities.In the practical significance of this research:first, through the collation and analysis of existing sovereign debt restructuring, so that we can be rational and effective use of debt restructuring to solve the debt crisis. The debt crisis is the result of many factors, external factors mainly depends on the development of the global economy, China can’t control the debt; but the internal factors which is caused by the economic and financial policies of various countries, debt can be corrected by policy changes. So, sovereign debt restructuring can not simply implementing debt relief and debt maturity change, should focus on the debt of China economic system and structure improvement. Second, the debt reorganization, analysis of the impact of sovereign credit rating changes on the currency market, rational view and use the sovereign credit rating, which provide a reference for the economic development of our country produce beneficial effect. At present, trigger a credit rating the quality of the products down, credit rating agencies and credit rating agencies of misconduct by the regulatory authority of credit crisis, contributing to the global financial crisis and economic crisis, but also makes the credit rating of this tool more and more the lack of authoritative and convincing. But sovereign credit rating as the main decision-making reference to investors, for an international to attract external investment is significant. China’s entry into the international capital market, have to accept which is a universal rule. Third, through the analysis of correlation of sovereignty or debt, the debt or have a correct understanding. In the process of construction of our country socialist market economy, the need for economic development, the local government not only borrow direct debts, but also formed a huge contingent debt. The problems of the economic development if not resolved, will not only affect economic development, but also may cause a recession of the local economy.Specifically, this paper consists of eight chapters. The structure and main contents are as follows:The first chapter is the introduction, mainly expounds the train of thought and logic of the research background, significance, objective, method, innovation and shortage, may.The second chapter is the literature review, a systematic review of the previous literatures about foreign sovereign debt restructuring, the creditor and existence, bond yields, debt default and four aspects of the debt crisis, sovereign debt restructuring on literature review. Sovereign debt restructuring is inevitable product of the development of a certain historical stage in sovereign debt. With the rapid development of international capital markets, debt sovereign countries led to sovereign risk, risk accumulation sovereign default, default solution requires sovereign debt restructuring, debt restructuring is to make the further development opportunities and reduce the loss. Based on the literature review, the paper further research direction.The third chapter makes research on the related problems of sovereign debt risk. First, summarize the related effects of sovereign debt. The sovereign debt of debtor nations, has positive effect already, also have negative effect. Which has the positive influence:enhance the debtor country economic development strength, to create a good investment conditions, to solve the problem of country debt investment problem, break the debtor country impoverished vicious spiral of debt and improve national welfare; negative effects are:the economic burden of debt, surplus value loss, strengthen the developed countries to the developing countries financial hegemonic penetration, to raise the debt of China’s financial system vulnerability, the debt’s reputation has a negative effect. On this basis, the types and the related indicators of sovereign risk analysis. Sovereign debt risk is the risks are compounded, including:market risk, liquidity risk, credit risk, the risk of rollover risk and debt structure. Measure indicators are:debt ratio, debt ratio, debt ratio and the three party certification institutions to provide credit rating. Finally, we in the major economies debt risk assessment and analysis of the status and risk of China’s debt, good knowledge in preparation for the further research of sovereign debt restructuring.The fourth chapter analysis reasons of default on the debt of china. First review the history of sovereign debt default, reason and condition and debt default default;, secondly, the analysis framework of Obstfeld, establish mathematical model to analyze the debtor default cost; finally, we use a two-period debt model analysis, the debt of the existing debt overhang effect, further borrowing will only let the burden of debt of more and more. So there is still solvent conditions, choose the default.The relevant contents of the fifth chapter according to the existing debt restructuring case study of sovereign debt restructuring. First of all, the existing international sovereign debt restructuring events, including the impact on the world economy in Latin America debt restructuring in1982,, Russia debt restructuring in1998, Argentina debt restructuring in2002, Greek debt restructuring in2012. Influence on the economic reasons, respectively, the process of restructuring and reorganization are analyzed. Secondly, based on the sovereign debt restructuring to different extent, summarizes three can choose the way of debt restructuring:change the maturity structure of debt, debt relief and debt transfer, and focus on the analysis of the developing countries in the new debt restructuring mode-creditor’s rights transfer. Secondly, analyzed the main factors influencing the debt restructuring:creditors structure and recombination of relevant laws and regulations. Finally, the valuation discount (haicut) measure the degree of reduction of debt restructuring.The sixth chapter, through the sovereign credit rating change of sovereign debt restructuring, debt stability influence how the foreign exchange market. This chapter, according to the emerging economies in different period, facing the sovereign rating adjustment and exchange market reaction, using the event study method, empirical analysis. Through the analysis, we found that, in the impact period sovereign rating to adjust to different on the foreign exchange market there exists difference, the market fluctuation affected, gradually decreased along with the economic development. Adjust the information exchange market of sovereign rating to negative response, large to adjust the impact on the market, the two period is respectively30.98times and20.93times of the positive effect of the adjustment.The seventh chapter is the conclusion and outlook, summarizes the full text.This article may have the following innovations:(1) the analysis framework Obstfeld, establish mathematical model analysis of the cost of debt default.8by comparing the debt before the outbreak and the Latin American debt before the outbreak of the main countries default cost, and conclude that there is the cost of default conditions, causes of debt still choose to default is the debt of the accumulation of large amounts of debt exceeds its solvency, the foreign debt on debt investments in the tax effect, dampen the economic growth rate. At this time, the only choice of debt default.(2) using the event study method, quantitative analysis of the sovereign debt restructuring through sovereign credit rating change, impact on the debt of foreign exchange market.(3) to the Chinese government or debt situation and existing problems of the research, put forward to China or debt restructuring ideas.The shortcomings of this study:first, the sovereign debt restructuring mechanism problem of excessive involve legal knowledge, causes the related mechanism based on the study of debt restructuring, not comprehensive, analysis can only focus on economic level. Second, the sovereign or debt restructuring or debt problems because of the concealment and uncertainty, it is difficult to analyze the effective quantization.