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...

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...

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...

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...

We present a simple model of sovereign debt crises in which a country chooses its optimal mix of short and long-term bonds subject to standard contracting frictions: the country cannot commit to repay its debts nor to a specific path of future debt issues, and contracts cannot be made state...

A large literature has developed quantitative versions of the Eaton and Gersovitz (1981) model to analyze default episodes on external debt. In this paper, we study whether the same framework can be applied to the analysis of debt crises in which domestic public debt plays a prominent role. We...

We develop a model that captures important features of debt crises of the Brazilian type. Its applicability to Brazil lies in the fact that (1) macro fundamentals were sound in the wake of the crisis (e .g., a non-negligible primary surplus, a relatively low debt/GDP ratio, low inflation, etc.);...

This chapter is on quantitative models of sovereign debt crises in emerging economies. We interpret debt crises broadly to cover all of the major problems a country can experience while trying to issue new debt, including default, sharp increases in the spread and failed auctions. We examine the...

We investigate markets for defaultable sovereign debt in which even though there are many identical lenders and symmetric information (including no hidden actions), perfect competition does not obtain. When a private lender allows a sovereign country to increase its level of indebtedness, that...

A traditional explanation for why sovereign governments repay debts is that they want to keep good reputations so they can easily borrow more. Bulow and Rogoff show that this argument is invalid under two conditions: (i) there is a single debt relationship, and (ii) regardless of their past...