Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111205
Authors: 
Drelichman, Mauricio
Voth, Hans-Joachim
Year of Publication: 
2014
Series/Report no.: 
Working Paper Series, University of Zurich, Department of Economics 145
Abstract: 
Contingent sovereign debt can create important welfare gains. Nonetheless, there is almost no issuance today. Using hand-collected archival data, we examine the first known case of large-scale use of state-contingent sovereign debt in history. Philip II of Spain entered into hundreds of contracts whose value and due date depended on verifiable, exogenous events such as the arrival of silver fleets. We show that this allowed for effective risk-sharing between the king and his bankers. The existence of statecontingent debt also sheds light on the nature of defaults - they were simply contingencies over which Crown and bankers had not contracted previously.
Subjects: 
Sovereign debt
contingent debt
fiscal policy
debt crisis
JEL: 
H1
H63
N43
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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