Sovereign Debt and Consumption Smoothing
AbstractThis paper shows that whether or not a sovereign can borrow to smooth consump- tion depends both on how consumption smoothing is achieved, whether by contingent debt issuance or by contingent debt servicing, and on the penalty for debt repudiation. If a sovereign that repudiated its debt could not borrow again, but could continue to save and to dissave, then contingent debt issuance, without contingent debt servicing, cannot support a positive amount of uncollateralized sovereign debt. But, with this same penalty for repu- diation, contingent debt servicing supports a positive amount of uncollateralized sovereign debt.
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Bibliographic InfoPaper provided by Brown University, Department of Economics in its series Working Papers with number 97-6.
Length: 13 pages
Date of creation: 1997
Date of revision:
Contact details of provider:
Postal: Department of Economics, Brown University, Providence, RI 02912
Other versions of this item:
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
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.:
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NBER Working Papers
1673, National Bureau of Economic Research, Inc.
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- Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Wiley Blackwell, vol. 48(2), pages 289-309, April.
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