On The Stock of External Sovereign Debt

Data on the stock of sovereign debt are typically presented at "face value", defined as the undiscounted sum of future principal repayments. This measure has some obvious problems. As it includes only principal repayments, it can give a misleading depiction of relative indebtedness levels, and can give countries an incentive to distort debt issuance to hit simple staistical targets. As it is undiscounted, it can be a misleading indicator of the value of the debt to investors and the burden of repaying the debt to the country. In this paper, we use theory to guide us in the construction of several new measures of the stock of external sovereign debt for 150 countries from 1980 to 2006. We use our measures to bound the welfare gains from debt relief.