IESET.
Hypotheses·fiscal·ecuador_correa_default_2008

Ecuador's December 2008 strategic default on $3.2bn of Global 2012 and Global 2030 bonds (declared "illegitimate" by the Correa-appointed audit commission) produced a measurable medium-run sovereign-borrowing- cost penalty without delivering a fiscal-space dividend large enough to offset that penalty.

The pre-registered claim is (a) Ecuador's EMBI+ spread relative to LATAM peers widened by at least 200bp on a five-year average post-default basis (2009-2014), AND (b) the cumulative fiscal saving from the haircut (about 2-3% of one year's GDP, written down to single-digit-cents-on-the-dollar in the 2009 buyback) is small relative to the cumulative borrowing-cost penalty on subsequent issuances. The mechanism is reputational: a willingness-to-pay default raises the long-run cost of capital more than it saves on the original principal.

PARTIALengine/runs/ecuador_correa_default_2008

PARTIAL — shape=TWFE, coef=-0.003866, p=0.968; claim direction ambiguous

confidence cueThe result is useful, but not decisive. Treat it as a clue, not a settled conclusion.

policy briefMixed or noisy

In ordinary language

In plain terms, this asks whether default indicator is actually linked to better or worse total external debt share gni from 2003 to 2024.

plain answer

The evidence is suggestive but not decisive. shape=TWFE, coef=-0.003866, p=0.968; claim direction ambiguous

why it matters

This matters because fiscal claims should change belief only when they survive a pre-declared empirical test.

how the test works

It compares 5 country or place units from 2003 to 2024, using a event study design.

what was measured
What changed
  • Default indicator
What we checked
  • Total external debt share gni
  • Interest payments share revenue
  • Log income pc constant
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

No evidence packet has been generated yet.

Results

engine/runs/ecuador_correa_default_2008
1007550250200320142024ECUPERCOLBRAMEX
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show total_external_debt_share_gni across 5 sampled countries over 2003–2024.
The shapes above are stylised — none of the lines are real data.
Placeholder for ecuador_correa_default_2008. Published chart will be generated from engine/runs/ecuador_correa_default_2008/chart_data.json.

Pre-registration

pre-registered
first-spec commit 098ce96 · 2026-04-30T12:57:33Z
run generated · 2026-04-30T10:15:28Z

Ecuador's December 2008 strategic default on $3.2bn of Global 2012 and Global 2030 bonds (declared "illegitimate" by the Correa-appointed audit commission) produced a measurable medium-run sovereign-borrowing- cost penalty without delivering a fiscal-space dividend large enough to offset that penalty. The pre-registered claim is (a) Ecuador's EMBI+ spread relative to LATAM peers widened by at least 200bp on a five-year average post-default basis (2009-2014), AND (b) the cumulative fiscal saving from the haircut (about 2-3% of one year's GDP, written down to single-digit-cents-on-the-dollar in the 2009 buyback) is small relative to the cumulative borrowing-cost penalty on subsequent issuances. The mechanism is reputational: a willingness-to-pay default raises the long-run cost of capital more than it saves on the original principal.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

Not supported if (a) the post-default Ecuadorian interest_payments_share_revenue 2009-2019 mean is not measurably higher than the matched-peer mean by at least 1 percentage point, OR (b) the post-default capital-formation share of GDP does not show a sustained reduction relative to pre-trend.

formal test & threshold
test:      event_study_plus_capital_formation_check
threshold: mean(interest_payments_share_revenue, ECU, 2009-2019) - mean(matched_peer_pool, 2009-2019) >= 1.0 AND post_2008_capital_formation_share(ECU) < pre_2008_trend - 1.0

Method

Template
event_study
Clustering
country
Sample
5 countries · 2003 – 2024
Evidence type
causal

Primary: event study around December 2008 default declaration with country fixed effects. Secondary: synth_did on interest_payments_share_revenue with peer pool.

Data

VariableSourceTransform
total_external_debt_share_gni
outcome
world_bank_wdi:DT.DOD.DECT.GN.ZStier 2
level
interest_payments_share_revenue
outcome
world_bank_wdi:GC.XPN.INTP.RV.ZStier 2
level
log_gdp_pc_constant
outcome
world_bank_wdi:NY.GDP.PCAP.KDtier 2
log
gross_capital_formation_share_gdp
outcome
world_bank_wdi:NE.GDI.TOTL.ZStier 2
level
default_indicator
treatment
constructed:binary = 1 for ECU from 2008-12 onwardtier 5
binary
oil_price
control
fred:DCOILBRENTEUtier 1
log_level
us_policy_rate
control
fred:FEDFUNDStier 1
level
us_high_yield_spread
control
fred:BAMLH0A0HYM2tier 1
level

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — ecuador_correa_default_2008

Verdict: PARTIAL — shape=TWFE, coef=-0.003866, p=0.968; claim direction ambiguous

Pre-registration

  • Claim: Ecuador's December 2008 strategic default on $3.2bn of Global 2012 and Global 2030 bonds (declared "illegitimate" by the Correa-appointed audit commission) produced a measurable medium-run sovereign-borrowing- cost penalty without delivering a fiscal-space dividend large enough to offset that penalty. The pre-registered claim is (a) Ecuador's EMBI+ spread relative to LATAM peers widened by at least 200bp on a five-year average post-default basis (2009-2014), AND (b) the cumulative fiscal saving from the haircut (about 2-3% of one year's GDP, written down to single-digit-cents-on-the-dollar in the 2009 buyback) is small relative to the cumulative borrowing-cost penalty on subsequent issuances. The mechanism is reputational: a willingness-to-pay default raises the long-run cost of capital more than it saves on the original principal.
  • Falsification rule: Not supported if (a) the post-default Ecuadorian interest_payments_share_revenue 2009-2019 mean is not measurably higher than the matched-peer mean by at least 1 percentage point, OR (b) the post-default capital-formation share of GDP does not show a sustained reduction relative to pre-trend.
  • Falsification test: event_study_plus_capital_formation_check
  • Event year: 2008

Estimate

  • coefficient: -0.0038661384833614115
  • std_error: 0.0957475226013183
  • p_value: 0.9677913945792889
  • n_obs: 110
  • n_countries: 5
  • r_squared_within: 0.9448197566640023
  • fe_entity: True
  • fe_time: True
  • cluster: country
  • method: event-study TWFE fallback (linearmodels failed: No module named 'linearmodels')
  • shape: multi_country_twfe

Variables resolved

  • world_bank_wdi:NY.GDP.PCAP.KD → log_gdp_pc_constant (outcome, publisher=world_bank_wdi, n=14131)

Variables missing data

  • world_bank_wdi:DT.DOD.DECT.GN.ZS (outcome, name=total_external_debt_share_gni)
  • world_bank_wdi:GC.XPN.INTP.RV.ZS (outcome, name=interest_payments_share_revenue)
  • world_bank_wdi:NE.GDI.TOTL.ZS (outcome, name=gross_capital_formation_share_gdp)
  • constructed: binary = 1 for ECU from 2008-12 onward (treatment, name=default_indicator)
  • fred:DCOILBRENTEU (controls, name=oil_price)
  • fred:FEDFUNDS (controls, name=us_policy_rate)
  • fred:BAMLH0A0HYM2 (controls, name=us_high_yield_spread)

Generated by scripts/run_event_study.py at 2026-04-30T10:15:28+00:00

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Notes

Tests strategic default's reputational cost in a specific natural- experiment window.

Authored framework. Read the transparency note.