In an influential paper, Bulow and Rogoff (1989) prove that in a competitive financial market, the threat of credit exclusion alone cannot sustain repayment of sovereign debt, as the defaulting government can still enter cash-in-advance insurance contracts. However, their result relies on an...

This paper develops a sovereign debt model with investment, in which the country's productivity shock has two components: a private shock (such as a change in domestic institutions) and a public shock (such as a publicly observed technological change). The government observes the private shock,...

This paper develops a theory of sovereign borrowing, where the interaction between the asymmetry of information and the lack of commitment for repayment leads to a novel signaling motive for the issuance of sovereign debt. If the government is more informed than foreign investors about a...