Market Reactions to Sovereign Litigation

Faisal Ahmed, Politics

Date: 
Wed, 10/05/2016
Location: 
438 Robertson Hall
Audience: 
Graduate Students

LEGS, or "Law-Engaged Graduate Students," meets during the academic year to discuss a work in progress by one of our Graduate Associates. Academic papers, dissertation proposals, and dissertation chapters have been presented at these meetings, to an audience of fellow graduate students.

Abstract:  Recent rulings in the ongoing litigation over the pari passu clause in Argentinian sovereign debt instruments have generated considerable controversy.  Some official-sector participants and academic articles have suggested that the rulings will disrupt or impede future sovereign debt restructurings by encouraging holdout creditors to litigate for full payment instead of participating in negotiated exchange offers. This paper critically examines this claim by evaluating market reactions to litigation using an event study methodology. We analyze the effect on sovereign bonds from litigation events, with particular emphasis on Argentina for the period, 1993-2014. We find evidence that the market reacts differently to Argentina than in other countries.  

Faisal Ahmed is an assistant professor of Politics at Princeton University, currently on-leave (2016-17) as a National Fellow at the Hoover Institution.  His research and teaching interests focus on political economy and international economics, and he has published in the American Political Science Review, American Economic Journal – Macroeconomics, Review of Economics and Statistics, and the Journal of Law, Economics, and Organization.  Prior to joining the faculty at Princeton, he was a Prize Research Fellow at Nuffield College, Oxford University, and worked as an international and macroeconomist at the White House Council of Economic Advisers and the Federal Reserve Bank of Chicago.