Bloise, Gaetano; Polemarchakis, Heraklis M.; Vailakis, … - In: Theoretical Economics 12 (2017) 3, pp. 1121-1154
We show that sovereign debt is unsustainable if debt contracts are not supported by direct sanctions and default … carries only a ban from ever borrowing in financial markets even in the presence of uninsurable risks and time … most optimistic valuation. We provide examples where this condition fails and sovereign debt is sustained by the threat of …