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Serial defaults, serial profits: Returns to sovereign lending in Habsburg Spain, 1566-1600.
- Source :
-
Explorations in Economic History . Jan2011, Vol. 48 Issue 1, p1-19. 19p. - Publication Year :
- 2011
-
Abstract
- Philip II of Spain accumulated debts equivalent to 60% of GDP. He also defaulted four times on his short-term loans, thus becoming the first serial defaulter in history. Contrary to a common view in the literature, we show that lending to the king was profitable even under worst-case scenario assumptions. Lenders maintained long-term relationships with the crown. Losses sustained during defaults were more than compensated by profits in normal times. Defaults were not catastrophic events. In effect, short-term lending acted as an insurance mechanism, allowing the king to reduce his payments in harsh times in exchange for paying a premium in tranquil periods. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00144983
- Volume :
- 48
- Issue :
- 1
- Database :
- Academic Search Index
- Journal :
- Explorations in Economic History
- Publication Type :
- Academic Journal
- Accession number :
- 58455103
- Full Text :
- https://doi.org/10.1016/j.eeh.2010.08.002