Paper #1262

Título:

Serial defaults, serial profits: Returns to sovereign lending in Habsburg Spain, 1566-1600

Autores:

Mauricio Drelichman y Joachim Voth

Data:

Enero 2011

Resumen:

Philip II of Spain accumulated debts equivalent to 60% of GDP. He also defaulted four times on his short-term loans, thus becoming the first serial defaulter in history. Contrary to a common view in the literature, we show that lending to the king was profitable even under worst-case scenario assumptions. Lenders maintained long-term relationships with the crown. Losses sustained during defaults were more than compensated by profits in normal times. Defaults were not catastrophic events. In effect, short-term lending acted as an insurance mechanism, allowing the king to reduce his payments in harsh times in exchange for paying a premium in tranquil periods. © 2010 Elsevier Inc. All rights reserved.

Palabras clave:

Sovereign debt, Serial default, Rate of return, Profitability, Spain

Códigos JEL:

N23, F34, G12

Área de investigación:

História Económica y de la Empresa

Publicado en:

Explorations in Economic History, January 2011, 48 (1), pp. 1-19. Explorations Prize for best article published in "Economic History" in 2010/11

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