@techreport{NBERw8853,
 title = "One Reason Countries Pay their Debts: Renegotiation and International Trade",
 author = "Andrew K. Rose",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "8853",
 year = "2002",
 month = "March",
 URL = "http://www.nber.org/papers/w8853",
 abstract = {This paper estimates the effect of sovereign debt renegotiation on international trade. Sovereign default may be associated with a subsequent decline in international trade either because creditors want to deter default by debtors, or because trade finance dries up after default. To estimate the effect, I use an empirical gravity model of bilateral trade and a large panel data set covering fifty years and over 200 trading partners. The model controls for a host of factors that influence bilateral trade flows, including the incidence of IMF programs. Using the dates of sovereign debt renegotiations conducted through the Paris Club as a proxy measure for sovereign default, I find that renegotiation is associated with an economically and statistically significant decline in bilateral trade between a debtor and its creditors. The decline in bilateral trade is approximately eight percent a year and persists for around fifteen years.},
}