Sovereign Defaults by Currency Denomination

46 Pages Posted: 29 Jun 2014 Last revised: 19 Nov 2018

See all articles by Alexandre Jeanneret

Alexandre Jeanneret

HEC Montréal

Slim Souissi

TELECOM Ecole de Management; Université d'Évry

Date Written: December 30, 2014


This paper explores the drivers of sovereign defaults in 100 countries over the period 1996-2012. We build a new data set of sovereign defaults and find that default events on local and foreign currency bonds are equally likely. However, governments default under different economic and financial conditions depending on the currency in which bonds are issued. The explained variation in default probability rises from 43% to 62% when we account for differences in currency denomination. We also provide evidence that global factors and market sentiment, which are known to drive sovereign spreads, do not help explain the probability of sovereign default. Hence, these factors appear to affect the price of sovereign credit risk, but not the risk itself.

Keywords: Sovereign Default, Local Currency Debt, Foreign Currency Debt, International Bonds

JEL Classification: F31, F33, F34, F41, H63

Suggested Citation

Jeanneret, Alexandre and Souissi, Slim, Sovereign Defaults by Currency Denomination (December 30, 2014). Journal of International Money and Finance, (60) 2016. Available at SSRN: or

Alexandre Jeanneret

HEC Montréal ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7


Slim Souissi (Contact Author)

TELECOM Ecole de Management ( email )

9, rue Charles Fourier
Évry, Ile de France 91011

Université d'Évry ( email )

Bd. François Mitterrand
F-91025 Evry Cedex, Ile de France 91028

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