Debt and Default in the 1930s: Causes and Consequences
AbstractThis paper analyzes the "debt crisis" of the 1930s to see what light this historical experience sheds on recent difficulties in international capital markets. We first consider patterns of overseas lending and borrowing in the 1920s and 1930s, comparing the performance of standard models of foreign borrowing in this period to the 1970-80s. Next, we analyze the incidence and extent of defaulton sovereign debt, adapting models of debt capacity to the circumstances of the interwar years. We consider the choices available to investors in those foreign loans which lapsed into default in the 1930s, emphasizing the distinction between creditor banks and bond holders. Finally, we provide the first estimates of the realized rate of return on foreign loans floated between the wars, based on a sample of dollar andsterling bonds issued in the 1920s.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1772.
Date of creation: Dec 1985
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Publication status: published as Eichengreen, Barry and Richard Portes. "Debt and Default in the 1930s: Causes and Consequences," European Economic Review, Vol. 30, June 1986, pp. 599-640.
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Other versions of this item:
- Eichengreen, Barry & Portes, Richard, 1986. "Debt and default in the 1930s : Causes and consequences," European Economic Review, Elsevier, Elsevier, vol. 30(3), pages 599-640, June.
- Eichengreen, Barry & Portes, Richard, 1985. "Debt and Default in the 1930s: Causes and Consequences," CEPR Discussion Papers, C.E.P.R. Discussion Papers 75, C.E.P.R. Discussion Papers.
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- Carlos F. Diaz-Alejandro, 1984. "Latin American Debt: I Don't Think We Are in Kansas Anymore," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(2), pages 335-403.
- Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 48(2), pages 289-309, April.
- William A. Darity, 1985. "Loan pushing : doctrine and theory," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 253, Board of Governors of the Federal Reserve System (U.S.).
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