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

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