Financial Deregulation, Private Foreign Borrowing and the Risk of Sovereign Default: A Political-Economic Analysis
AbstractIt is often argued that financial liberalization and large external borrowing by the private sector bode ill for sovereign creditworthiness. In this paper, we highlight a channel through which financial liberalization reduces the risk that a developing country’s government defaults on its foreign debt. We present a simple model in which a deregulation-induced surge in private borrowing raises the political costs of default and reduces a government’s incentive to deny repayment
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Bibliographic InfoArticle provided by SKEMA Business School in its journal Frontiers in Finance and Economics.
Volume (Year): 7 (2010)
Issue (Month): 1 (April)
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Web page: http://www.ffe.esc-lille.com
International Investment; Sovereign Risk.;
Find related papers by JEL classification:
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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