Qian, RongEden, MayaKraay, Aart2013-01-022013-01-022012-10https://hdl.handle.net/10986/12055This paper uses a large cross-country dataset to empirically examine factors associated with sovereign defaults on external private creditors and expropriation of foreign direct investments in developing countries since the 1970s. In the long run, sovereign defaults and expropriations are likely to occur in the same countries. In the short run, however, these events are uncorrelated. Defaults are more likely to occur following periods of rapid debt accumulation, when growth is low, and in countries with weak policy performance, and defaults are not strongly persistent over time. In contrast, expropriations are not systematically related to the level of foreign direct investment, to growth, or to policy performance. Expropriations are however less likely under right-wing governments, and are strongly persistent over time. There is also little evidence that a history of recent defaults is associated with expropriations, and vice versa. The paper discusses the implications of these findings for models that emphasize retaliation as means for sustaining sovereign borrowing and foreign investment in equilibrium, as well as the implications for political risk insurance against the two types of events.en-USCC BY 3.0 IGOAFFILIATED ORGANIZATIONSARREARSARREARS ACCUMULATIONASSETSBANK BORROWERSBILATERAL CREDITORSBONDHOLDERSBREACH OF CONTRACTCAPITAL MARKETSCASE OF DEFAULTCASE OF DEFAULTSCHECKSCLAIMCOMMODITYCOMMODITY PRICESCONSUMPTION SMOOTHINGCOUNTRY FIXED EFFECTCOUNTRY FIXED EFFECTSCREDITWORTHINESSCURRENCYCURRENCY DEVALUATIONDEBTDEBT ACCUMULATIONDEBT CRISESDEBT CRISISDEBT OUTSTANDINGDEBT RENEGOTIATIONDEBT SERVICINGDEBT STOCKDEBTORSDEBTSDEFAULT RISKDEMOCRACYDEPENDENTDEVELOPING COUNTRIESDISBURSEMENTSDIVESTMENTDOLLAR VALUEDUMMY VARIABLEECONOMIC DEVELOPMENTECONOMIC SHOCKENFORCEMENT MECHANISMSEXCESSIVE DEBTEXCESSIVE DEBT ACCUMULATIONEXPOSUREEXPROPRIATIONEXPROPRIATIONSEXTERNAL DEBTFINANCIAL CRISESFOREIGN ASSETSFOREIGN COMPANIESFOREIGN CREDITORSFOREIGN DIRECT INVESTMENTFOREIGN DIRECT INVESTMENTSFOREIGN DIRECT INVESTORSFOREIGN ENTERPRISEFOREIGN ENTERPRISESFOREIGN INVESTMENTFOREIGN INVESTORSGOVERNMENT REVENUEGROWTH RATEGROWTH RATESHIGH DEBTIMPLICIT CONTRACTSINCOMEINCOME LEVELINCOME LEVELSINDEBTEDINDEBTED POOR COUNTRIESINSURANCEINSURANCE CLAIMSINSURERINSURERSINTERNATIONAL BANKINTERNATIONAL CAPITALINTERNATIONAL CAPITAL MARKETSINTERNATIONAL DEBTINTERNATIONAL ECONOMICSINTERNATIONAL MARKETINTERNATIONAL RESERVEINTERNATIONAL TRADELEGAL MECHANISMLENDERSLEVEL OF DEBTLEVELS OF DEBTLEVYLOW-INCOME COUNTRIESLOWER DEBTMARKET ACCESSMULTILATERAL CREDITORSMULTILATERAL INVESTMENT GUARANTEE AGENCYNATIONAL SECURITYNATURAL RESOURCENATURAL RESOURCESNPLOIL PRICEOPEN ECONOMYOUTPUTOUTPUT LOSSPOLICY RESPONSEPOLITICAL ECONOMYPOLITICAL RISKPOLITICAL RISK INSURANCEPOLITICAL SYSTEMPORTFOLIOPRIVATE CREDITORSPRIVATE INVESTMENTPRIVATIZATIONPRIVATIZATIONSREMEDYRENEGOTIATIONREPAYMENTREPUDIATIONREPUTATIONSRESERVERETURNSRISK OF DEFAULTRISK OF EXPROPRIATIONRISK OF EXPROPRIATIONSSECONDARY MARKETSSEIZURESSHORT-TERM DEBTSOVEREIGN DEBTSOVEREIGN DEBT MARKETSSOVEREIGN DEFAULTSOVEREIGN DEFAULTSSOVEREIGN RISKSTOCK OF DEBTSTOCKSSYSTEMIC RISKTHIRD WORLDTIME OF DEFAULTTURNOVERVALUE OF DEBTVOLATILITYWorld Bank10.1596/1813-9450-6218