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Endogenous debt crises

Listed author(s):
  • Cohen, Daniel
  • Villemot, Sébastien

We distinguish two types of debt crises: those that are the outcome of exogenous shocks (to productivity growth for instance) and those that are endogenously created, either by self-fulfilling panic in financial markets or by the reckless behavior of “Panglossian” borrowers. After Krugman, we characterize as “Panglossian” those borrowers who only focus on their best growth prospects, anticipating to default on their debt if hit by an adverse shock, rationally ignoring the risk of default.

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File URL: http://www.sciencedirect.com/science/article/pii/S0261560614001983
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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 51 (2015)
Issue (Month): C ()
Pages: 337-369

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Handle: RePEc:eee:jimfin:v:51:y:2015:i:c:p:337-369
DOI: 10.1016/j.jimonfin.2014.11.005
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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  1. Gelos, R. Gaston & Sahay, Ratna & Sandleris, Guido, 2011. "Sovereign borrowing by developing countries: What determines market access?," Journal of International Economics, Elsevier, vol. 83(2), pages 243-254, March.
  2. Campos, Camila F.S. & Jaimovich, Dany & Panizza, Ugo, 2006. "The unexplained part of public debt," Emerging Markets Review, Elsevier, vol. 7(3), pages 228-243, September.
  3. Aart Kraay & Vikram Nehru, 2006. "When Is External Debt Sustainable?," World Bank Economic Review, World Bank Group, vol. 20(3), pages 341-365.
  4. Chamon, Marcos, 2007. "Can debt crises be self-fulfilling?," Journal of Development Economics, Elsevier, vol. 82(1), pages 234-244, January.
  5. World Bank, 2006. "World Development Indicators 2006," World Bank Publications, The World Bank, number 8151, September.
  6. Beetsma, Roel & Mavromatis, Kostas, 2014. "An analysis of eurobonds," Journal of International Money and Finance, Elsevier, vol. 45(C), pages 91-111.
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