Nominal sovereign debt, risk shifting, and reputation
AbstractThis paper analyzes a reputational equilibrium in a model in which nominally denominated sovereign debt serves to shift risk associated with the unpredictability of tax revenues from the sovereign to its lenders. The analysis answers the following set of related questions: Why would a sovereign refrain from inflating when faced with servicing a large quantity of nominal debt? If a sovereign does not plan to use inflation to repudiate its nominal debts, why would it want to issue nominal debt in the first place? What are the distinguishing features of those sovereigns who are willing and able to issue nominal debts?
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economics and Business.
Volume (Year): 45 (1993)
Issue (Month): 3-4 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/jeconbus
Other versions of this item:
- Herschel I. Grossman & John B. Van Huyck, 1994. "Nominally Sovereign Debt, Risk Shifting, and Reputation," NBER Working Papers 2259, National Bureau of Economic Research, Inc.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Herschel I. Grossman & John B. Van Huyck, 1989.
"Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation, and Reputation,"
NBER Working Papers
1673, National Bureau of Economic Research, Inc.
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- Bohn, Henning, 1988. "Why do we have nominal government debt?," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 127-140, January.
- Lucas, Robert Jr., 1986. "Principles of fiscal and monetary policy," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 117-134, January.
- Amnon Levy, 1997. "Sovereign debt: Reputation, seizure and reputation," Journal of Economics and Finance, Springer, vol. 21(1), pages 69-79, March.
- Prasanna Gai & Kang-yong Tan, 2004.
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- Kang Yong Tan & Prasanna Gai, 2004. "Good Housekeeping? Reputation, Fixed Exchange Rates, and the 'Original Sin' Problem," Econometric Society 2004 Far Eastern Meetings 446, Econometric Society.
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