The Legacy and the Tyranny of Time: Exit and Re-Entry of Sovereigns to International Capital Markets

Abstract

We use a continuous-timeWeibull model (without and) with a change-point in duration dependence to investigate the duration of the exit and re-entry of sovereigns to international markets.We find that, as the reputation of debtor countries as good (bad) borrowers solidifies over time, those episodes are more likely to end—the “legacy of time.”Debtor countries take advantage of the “benefit of doubt” of creditors during short exits. When exits are long and the reputation as a bad borrower emerges, no more “complacency” makes it more difficult to borrow again in international markets—the “tyranny of time.”