The price of a safe asset reflects not only the expected discounted future cash flows but also future service flows, since retrading allows partial insurance of idiosyncratic risk in an incomplete markets setting. This lowers the issuers’ interest burden and allows the government to run a...

This article surveys the literature on sovereign debt sustainability from its origins in the mid-1980s to the present, focusing on four debates. First, the shift from an "accounting based" view of debt sustainability, evaluated using government borrowing rates, to a "model based" view which uses...