This paper studies an economy in which financial integration increases world welfare in the presence of international policy coordination but decreases world welfare in its absence. This happens because financial integration enhances the impact of domestic government policies on foreigners,...

The author studies models of sovereign debt bargaining of the kind proposed by J. Bulow and K. Rogoff. All agents act rationally with perfect foresight and perfect information. The main departure from previous studies is that the government of the debtor country acts on behalf of, but is not...