Regaining Access to Capital Markets: An Overview of Issues and Strategies


Courtesy: The Journal of Investing

This article discusses issues related to regaining market access for countries that have undergone sovereign debt restructurings. Defaults and restructurings may have adverse consequences for the debtor government’s access to capital post-crisis, leading to exclusion from capital markets and higher interest premia. However, the empirical evidence on this matter is inconclusive. While some earlier contributions conclude that default premia in sovereign credit markets are negligible, particularly in the medium and long run, more recent studies find that debt restructurings can have a substantial and longer-lasting impact on post-crisis market access conditions, with preemptive restructurings being associated with shorter periods of market exclusion. Strategies for regaining market access should be designed carefully, facilitated by enabling domestic macroeconomic and debt management strategies, and implemented when international financial conditions are favorable.

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