In the data sovereign default is always partial and varies in its duration. Debt levels during default episodes initially increase and do not experience reductions upon resolution. This paper presents a theory of sovereign default that replicates these properties, which are absent in standard...

We study the role of lack commitment in shaping the allocations of the canonical incomplete-markets sovereign default model of Eaton and Gersovitz (1981). We show how the equilibriumwith commitment to the circumstances under which default can be undertaken involves a verydifferent set of...