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This paper studies the historical origins of the federalist institutions in Mexico and Brazil. Using a bargaining game model, I argue that the type of commodities each country produced by the end of the nineteenth Century determined the negotiation power of local governments. This led to the buildup of opposite federalist institutions in both countries, which have persisted until nowadays. The model shows that countries with regions with more autonomy to produce and trade their commodities increase the local power to collect more taxes. While in Brazil coffee was the most important commodity, Mexico relied on mining products. Coffee was produced by local landowners who became economically powerful and they were able that export taxes were collected locally with the proclamation of the 1891 Constitution. Empirical estimates show that, after 1891, exporter states increased significantly their own fiscal revenue. On the other hand, mining was capital and technology intensive, inputs that were domestically scarce in Mexico. To finance those activities foreign investment was promoted centrally, weakening the relative power of local elites.

This paper explores the role of political stability on fiscal policy choices in a time-series analysis over 158 years on the Swiss federal level. We argue that the fiscal-commons problem of public finances is affected by the time-horizon of a finance minister. Arguably, the incentives for an incumbent to maintain a good reputation with sound policy decisions are stronger the longer the time-horizon of a respective term. In addition, a finance minister who succeeds to stay a long time in office normally enjoys a politically powerful position towards the parliament, the administration and the interest groups to influence policy decisions. In contrast, frequent government turnover weakens the position of the finance minister.

This paper uses the framework of arbitrage-pricing theory to study the relationship between liquidity risk and sovereign bond risk premia. The London Stock Exchange in the late 19th century is an ideal laboratory in which to test the proposition that liquidity risk affects the price of sovereign debt. This period was the last time that the debt of a heterogeneous set of countries was traded in a centralized location and that a sufficiently long time series of observable bond prices are available to conduct asset-pricing tests. Empirical analysis of these data establishes three new results. First, sovereign bonds with wide bid-ask spreads earn 3-4% more per year than bonds with narrow bid-ask spreads, and the difference is reflected in greater sensitivity to innovations in market liquidity. Second, small sovereign bonds, as measured by market value, earn 1.8-3.5% more per year than large sovereign bonds, and the difference is also reflected in their exposure to innovations in market liquidity. Third, market liquidity is a state variable important for pricing the cross-section of sovereign bonds. This paper thus provides estimates of the quantitative importance of liquidity risk as a determinant of the sovereign risk premium and underscores the significance of market liquidity as a nondiversifiable risk., Dans cette étude, l'auteur examine le lien entre le risque de liquidité et les primes de risque des obligations souveraines à l'aide de la théorie de l'arbitrage appliquée à l'évaluation des actifs. La Bourse de Londres à la fin du XIXe siècle constitue un laboratoire idéal pour mettre à l'épreuve l'hypothèse selon laquelle le risque de liquidité influe sur le prix des obligations souveraines. Cette époque est en effet la dernière au cours de laquelle la négociation des titres de dette d'un ensemble hétérogène d'États a été centralisée dans un même lieu et elle fournit des données qui permettent d'observer les prix des obligations sur une période suffisamment longue pour effectuer des tests d'évaluation des actifs. Une analyse empirique de ces données débouche sur trois nouveaux résultats. Premièrement, les obligations souveraines qui présentent de larges écarts entre les cours acheteur et vendeur rapportent 3 à 4 % de plus par an que celles pour lesquelles ces écarts sont faibles, et cette différence se traduit par une sensibilité accrue aux variations inattendues de la liquidité du marché. Deuxièmement, les petites obligations souveraines (d'après la valeur de marché) affichent des rendements annuels supérieurs de 1,8 à 3,5 % à ceux des obligations souveraines de grande taille; cette différence se répercute également sur la sensibilité du rendement de ces titres aux fluctuations imprévues de la liquidité. Enfin, la liquidité du marché s'avère une variable d'état importante aux fins de l'évaluation d'un échantillon transversal d'obligations souveraines. L'étude fournit des estimations quantitatives de l'influence du risque de liquidité sur l'établissement de la prime de risque souverain et met en évidence l'importance de la liquidité du marché en tant que risque non diversifiable.

This study investigate how debt restructurings have evolved over the decades. Debtors and creditors have a long history of engaging an outsider – a “third party”, such as the IMF – to organise and facilitate debt restructurings. As we show, the importance of these “third parties” has grown over time. At the same time, the financial environment has evolved rapidly, and financial markets have become more liquid and better able to spread risk in recent decades. In today's economic environment, the financial system of many advanced countries is better isolated from the negative consequences of a lengthy restructuring process. Consequently, from the perspective of creditor countries, the fact that “third parties” can facilitate and shorten the restructuring process has become less valuable. That said, emerging economies still benefit from involving a “third party”, as this might help to overcome coordination problems among creditors and signal that the local authorities are effectively dealing with the crisis, which might help to restore confidence. This holds all the more since creditors have better access to litigation nowadays than during earlier episodes of debt restructurings., Nous examinons comment les schémas de restructuration de la dette ont évolué au cours des décennies. Débiteurs et créanciers ont depuis longtemps l'habitude de confier à un tiers, tel le FMI, le soin d'organiser et de faciliter la restructuration d'une dette. Nous montrons que ces tiers ont été appelés à jouer un rôle de plus en plus important au fil des ans. Parallèlement, durant les dernières décennies, le contexte financier a connu une transformation rapide, et les marchés financiers sont devenus plus liquides et mieux à même de répartir les risques. Dans l'environnement économique d'aujourd'hui, le système financier de nombreux pays avancés est mieux protégé contre les conséquences négatives que peut avoir un long processus de restructuration. Par conséquent, la capacité des tiers à faciliter et à accélérer ce processus a perdu de son attrait aux yeux des pays créanciers. Cela dit, les économies émergentes bénéficient toujours de l'intervention de ces tiers. Ces derniers, en effet, peuvent les aider à surmonter les problèmes de coordination entre les créanciers et envoyer le signal que les autorités locales prennent des mesures adéquates pour gérer la crise, ce qui peut contribuer à rétablir la confiance. Ce rôle est d'autant plus important que les créanciers ont aujourd'hui plus de recours qu'ils n'en avaient autrefois face aux débiteurs qui restructurent leur dette.

The fate of the distressed debt issued by the 1836-1845 Republic of Texas has received surprisingly little attention. Annexation by the United States was almost certainly a necessary condition for the debt rising from the pennies-on-the-dollar values seen in the early 1840s. But the largest gains awaited legislation in the early 1850s that fixed the repayment terms on the debt. Statistical analysis confirms the link between the debt price and actual, or anticipated, congressional actions on the debt settlement after 1844.

During the Civil War the Arkansas legislature funded their expenditures primarily through interest-bearing warrants and war bonds. After these issues were made legal tender in November 1861, the discount attributed to them disappeared immediately and they began to circulate widely. By mid- 1862 they appeared to be preferred to Confederate notes - which were also made legal tender in November 1861 but required military intervention to support their acceptance. The widespread circulation and potential dominance of legal tender interest-bearing currency is consistent with legal restrictions theory. Confederate notes supplanted the Arkansas issues only after the legislature suspended interest payments in November 1862.

During the Civil War the Arkansas legislature funded their expenditures primarily through interest-bearing warrants and war bonds. After these issues were made legal tender in November 1861, the discount attributed to them disappeared immediately and they began to circulate widely. By mid- 1862 they appeared to be preferred to Confederate notes - which were also made legal tender in November 1861 but required military intervention to support their acceptance. The widespread circulation and potential dominance of legal tender interest-bearing currency is consistent with legal restrictions theory. Confederate notes supplanted the Arkansas issues only after the legislature suspended interest payments in November 1862.