Few sovereign debtors have repudiated their obligations entirely. But despite the significant sanctions at the disposal of lenders, many borrowers have been able to consistently negotiate for reduced repayments. This paper presents a model of the on-going bargaining process that determines...

International lending to a less-developed country cannot be based on the debtor's reputation for making repayments. That is, loans to LDCs will not be made or repaid unless foreign creditors have legal or other direct sanctions they can exercise against a sovereign debtor who defaults Even if...