This paper surveys the literature on sovereign debt from the perspective of understanding how sovereign debt differs from privately issue debt, and why sovereign debt is deemed safe in some countries but risky in others. The answers relate to the unique power of the sovereign. One the one hand,...

This paper presents a theory of sovereign borrowing and lending when there is no court to enforce repayment obligations. Specifically, I extend the costly state verification approach in financial contracting to include an ex-post repayment decision in which the borrower repays creditors to avoid...

This paper explores how selective default expectations affect the pricing of sovereign bonds in a historical laboratory: the German default of the 1930s. We analyze yield differentials between identical government bonds traded across various creditor countries before and after bond market...

This paper examines the causes, process, and outcome of Belize’s 2016–17 sovereign debt restructuring – its third episode in last 10 years. As was the case in the earlier two restructurings, in 2006-07 and in 2012-13, the 2016-17 debt restructuring was executed through collaborative...

How costly are sovereign debt crises? In this paper we study output losses during sovereign default and debt renegotiation episodes since 1980. In contrast to previous work, we account for the severity of default and not only for its occurrence. Specifically, we distinguish between "hard" and...

This paper discusses the legal framework for sovereign debt restructuring in the Euro area – both de lege lata and de lege ferenda. Sovereign debt restructurings remain exceptional events that come with profound implications for financial stability and monetary policy transmission. However,...

Two complainants brought a constitutional complaint before the German Constitutional Court. The complaint was directed against a judgement of the Federal Court of Justice (Bundesgerichtshof) that dismissed their action because the Hellenic Republic enjoyed state immunity before the German...

A mechanism to restructure the debt of an insolvent euro country is a missing element in the emerging institutional architecture of the euro area. The introduction of an insolvency procedure for sovereigns faces a dilemma: In the foreseeable future, its introduction would risk pushing Europe...

Countries with large debts stocks are vulnerable to the vagaries of the markets. Confidence crises can arise out of nowhere, constricting access to the markets. Hence, the question arises as to whether these countries should put in place mechanisms that will help them better prepare for the...

Is the seniority structure of sovereign debt neutral for a government's decision betweendefaulting and raising surpluses? In this paper, we address this question using a model ofdebt crises where a discretionary government endogenously chooses distortionary taxationand whether to apply an...