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We review the literature on sovereign debt. We organize our survey around three central questions: (1) Why do sovereign debtors ever repay their debts? (2) What burdens, in the form of distortions and inefficiencies, does sovereign debt impose? and (3) How might debt be restructured to reduce...
Persistent link: https://www.econbiz.de/10012473755
In 1841 and 1842, eight states and the Territory of Florida defaulted on their sovereign debts. Traditional histories of the default crisis have stressed the causal role of the depression that began with the Panic of 1837, unexpected revenue shortfalls from canal and bank investments as a result...
Persistent link: https://www.econbiz.de/10012467937
Nominal debt provides consumption-smoothing benefits if it can be inflated away during recessions. However, we document empirically that countries with more countercyclical inflation, where nominal debt provides better consumption-smoothing, issue more foreign-currency debt. We propose that...
Persistent link: https://www.econbiz.de/10012456087
of lenders, many borrowers have been able to consistently negotiate for reduced repayments. This paper presents a model …
Persistent link: https://www.econbiz.de/10012476981
As a response to economic crises triggered by COVID-19, sovereign debt standstill proposals emphasize debt payment suspensions without haircuts on the face value of debt obligations. We quantify the effects of standstills using a standard default model. We find that a one-year standstill...
Persistent link: https://www.econbiz.de/10012482510
This possibility of debt default provides the fiscal authority to issue public bonds strategically in an earlier period …We include a potential possibilities of the government bonds in our theoretical model. The public bonds, therefore …
Persistent link: https://www.econbiz.de/10012466308
This paper surveys the literature on the macroeconomic effects of government debt. It begins by discussing the data on debt and deficits, including the historical time series, measurement issues, and projections of future fiscal policy. The paper then presents the conventional theory of...
Persistent link: https://www.econbiz.de/10012472335
This paper introduces the concept of debt intolerance,' which manifests itself in the extreme duress many emerging markets experience at debt levels that would seem manageable by advanced country standards. We argue that safe' external debt-to-GNP thresholds for debt intolerant countries are...
Persistent link: https://www.econbiz.de/10012468789
What determines the sustainability of sovereign debt? We develop a model where myopic governments seek popularity but can nevertheless commit credibly to service external debt. They do not default when debt is low because they would lose access to debt markets and be forced to reduce spending;...
Persistent link: https://www.econbiz.de/10012461116
Reducing high public debts is key for countries seeking to restore fiscal capacity and resilience in the wake of recent crises. But large debt reductions are rare. Jamaica stands out for reducing its debt from 144 percent of GDP to 72 percent over the last decade, a record achieved by running...
Persistent link: https://www.econbiz.de/10014544743