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Sovereign Debt

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  • Jonathan Eaton
  • Raquel Fernandez

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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5131.

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Date of creation: May 1995
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Publication status: published as Handbook of International Economics, vol. 3, G. Grossman and K. Rogoff,eds., (Amsterdam: North-Holland, 1995), pp. 2032-2077
Handle: RePEc:nbr:nberwo:5131

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