The main arguments for the Stability and Growth Pact turn on the need to protect the European Central Bank against inflationary pressures from the fiscally prodigal countries (repudiation through inflation). Taking a political economy approach, in this paper we inquire into the conditions under...

This paper proposes a stylized two-period two-country model illustrating the role played by the distribution of domestic wealth in determining a country’s level of access to international lending. We model sovereign debt redemption policy as the outcome of the interaction between the...