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Sovereign Debt Puzzles

Author

Listed:
  • Patrick Bolton

    (Imperial College, London, United Kingdom)

  • Mitu Gulati

    (School of Law, University of Virginia, Charlottesville, Virginia, USA)

  • Ugo Panizza

    (Center for Economic Policy Research, London, United Kingdom)

Abstract

We review the state of the sovereign debt literature and point out that the canonical model of sovereign debt cannot be easily reconciled with several facts about sovereign debt pricing and servicing. We identify and classify more than 20 puzzles. Some are well-known and documented, others are less so and are sometimes based on anecdotal evidence. We classify these puzzles into three categories: puzzles about how sovereigns issue debt; puzzles about the pricing of sovereign debt; and puzzles about sovereign default and the working out of defaults. We conclude by suggesting possible avenues for new research aimed at reconciling theory with what we observe in the real world.

Suggested Citation

  • Patrick Bolton & Mitu Gulati & Ugo Panizza, 2023. "Sovereign Debt Puzzles," Annual Review of Financial Economics, Annual Reviews, vol. 15(1), pages 239-263, November.
    • Handle: RePEc:anr:refeco:v:15:y:2023:p:239-263
    DOI: 10.1146/annurev-financial-111620-030025
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    Cited by:

    1. Bassa, Karolina & Cont, Rama, 2025. "Dynamics of sovereign debt: credit risk and sustainability analysis," INET Oxford Working Papers 2025-24, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    2. Apeti, Ablam Estel & Obeng, Samuel & Tagem, Abrams & Were, Maureen, 2025. "Sovereign Default and Public Debt: What role for Fiscal Rules?," The Warwick Economics Research Paper Series (TWERPS) 1567, University of Warwick, Department of Economics.

    More about this item

    Keywords

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    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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