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-varying interest rate. This extension of Bulow and Rogoff, 1989 requires...

A common view of sovereign debt markets is that they are prone to multiple equilibria. We show that such multiplicity does not exist in the infinite-horizon model of Eaton and Gersovitz (1981), a widely adopted benchmark for analyses of these markets. When the value from government default is...

This study investigates the reaction of stock prices to sovereign debt restructurings and credit rating reviews in six frontier stock markets. The study uses the event study methodology corrected for the impact of thin trading to investigate stock market reaction to sovereign debt restructurings...

This paper calls attention to the role of the secondary market in shortening the duration of sovereign debt renegotiation. Consider a dynamic bargaining game with incomplete information between a government and creditors. The creditors' reservation is private information, and the government...

This paper documents the market reaction to the introduction of the European Financial Stability Facility (EFSF) in 2010 and 2011. The effect on borrowing rates is ambiguous - Greece, Ireland, Portugal, Spain, Italy and Slovenia exhibit a decrease in rates on event days, the remaining Eurozone...

We show that debt is sustainable at a competitive equilibrium based solely on the reputation for repayment; that is, even without collateral or legal sanctions available to creditors. In an incomplete asset market, when the rate of interest falls recurrently below the rate of growth of the...

I construct a continuous time model of strategic default and provide a numerical algorithm that solves it. I compare the results and computation times to standard discrete time models of sovereign debt. The method proposed here is faster than discrete time computation methods while obtaining...