If a country is ready to default on internal debt and ready to confiscate their citizen's money to pay external liabilities, does that affect the yields of the external debt?

If yes, does that make it higher or lower?

  • 1
    $\begingroup$ Interesting question. Unfortunately I think it is too broad because a lot depends on the details. Are the citizens enlightened and disciplined enough to agree to the interal default because it is better for their society than the external default? Or has there been a communist revolution which first defaults on internal debt without the consent of the creditors before turning towards external enemies? Without knowing the exact economic scenario zounds of answers are possible. $\endgroup$
    – Giskard
    Feb 18, 2016 at 12:08

1 Answer 1


Probably, but it's not visible because a country is usually already in shambles before a default, and data collection for domestic debt crises is poor.

Here is a list of defaults:


Here's some rate data:




There have been many cases where countries default on only internal debt. Argentina did this. I can't find bond data anywhere. But when it defaulted on domestic debt (1989), inflation went up and the currency fell. Which is pretty much the same as an increase in external interest rates.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge that you have read and understand our privacy policy and code of conduct.

Not the answer you're looking for? Browse other questions tagged or ask your own question.