Sovereign Debt and Consumption Smoothing
AbstractThis paper shows that whether or not a sovereign can borrow to smooth consumption depends both on how consumption smoothing is achieved, whether by contingent debt issuance or by contingent debt servicing, and on the exact nature of 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, under this same specification of the penalty for repudiation, contingent debt servicing supports a positive amount of uncollateralized sovereign debt.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5997.
Date of creation: Apr 1997
Date of revision:
Note: EFG ME
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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
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