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Sovereign debt

In: Handbook of International Economics

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  • Eaton, Jonathan
  • Fernandez, Raquel

Abstract

We review the literature on sovereign debt. We organize our survey around three central questions: (1) Why do sovereign debtors ever repay their debts? (2) What burdens, in the form of distortions and inefficiencies, does sovereign debt impose? and (3) How might debt be restructured to reduce these burdens? In grappling with the first question the literature has pointed to, and argued about, the roles of reputation, punishments, rewards and renegotiation. In addressing the second the literature has asked whether sovereign debtors tend to borrow too much or too little, and how debt can distort the domestic economy. Answers to the third question include measures by creditors, by debtors, and by public institutions to reduce debt burdens.

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This chapter was published in:

  • G. M. Grossman & K. Rogoff (ed.), 1995. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 3, number 3, 00.
    This item is provided by Elsevier in its series Handbook of International Economics with number v:3:y:1995:i::p:2031-2077.

    Handle: RePEc:eee:intchp:v:3:y:1995:i::p:2031-2077

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