Simon Hinrichsen

You can now preorder my book (it’ll probably be out November) which is sadly quite topical - it’s a history of war reparations and how they’re paid. cambridge.org/dk/universityp…

When is inability to pay a good defense for paying war reparations? @WaibelM09 and I didn’t find that there was a good answer - so here’s our attempt: brill.com/view/journals/nord…

Link to the paper in the World Bank Economic Review: academic.oup.com/wber/advanc…

For my investor friends: All else equal, if you’re offered gdp-warrants in a restructuring - get more the fewer intermediate imports a country has. Perhaps it should also be reflected in spreads.

For my academic friends: This paper is empirical validation of Mendoza and Yue’s theoretical 2012 paper. The paper also corraborates recent higher (causal) estimates of the cost of default.

For my gov’t/advisor friends: If a country with a high share of intermediate imports faces a default, it is important to ensure access to financing for importing companies to minimize the cost of default (if a country has few intermediate imports, maybe a default is not so bad.)

The conclusion is that it’s quite costly to default. The cost of default increases for higher degrees of intermediate imports. There is, I think, a little in the paper for everyone.

How much does it cost a state to default on its sovereign debt? Quite a bit of ink and computing power has been used to answer the question and its related cousin (“why do countries repay their debt?”) Here is our attempt, fresh off the presses in the World Bank Economic Review.

My book is now out in paperback! It means you don’t have to break the bank to learn the history of war reparations, how they were financed in the past — and maybe learn a few lessons for the future. cambridge.org/dk/universityp…