Crony Capitalism and Sovereign Default
Cronyism provides policymakers with marked incentives to repay sovereign debt. This takes place at the expense of the average citizen who bears both steep costs of debt repudiation and high costs of debt service, as clientelism increases both financial fragility and the debt burden. The paper sets up a model of strategic debt default that nails down this point, with political distortions and where a representative agent can dismiss the government and overrule its decision. Economic hard times provide an opportunity to implement reforms fighting clientelism, as the implicit coalition between groups of cronies may break down. A model is built along these lines, which highlights cross-country contagion of debt repudiation. Copyright Springer Science + Business Media, Inc. 2005
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 16 (2005)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/international+economics/journal/11079/PS2|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Seema Jayachandran & Michael Kremer, 2006.
American Economic Review,
American Economic Association, vol. 96(1), pages 82-92, March.
- Michael Kremer & Seema Jayachandran, 2002. "Odious Debt," NBER Working Papers 8953, National Bureau of Economic Research, Inc.
- Seema Jayachandran, 2004. "Odious Debt," UCLA Economics Online Papers 298, UCLA Department of Economics.
- Keefer, Philip, 2001. "When do special interests run rampant ? disentangling the role in banking crises of elections, incomplete information, and checks and balances," Policy Research Working Paper Series 2543, The World Bank.
- Kumar, Manmohan S & Persaud, Avinash, 2002. "Pure Contagion and Investors' Shifting Risk Appetite: Analytical Issues and Empirical Evidence," International Finance, Wiley Blackwell, vol. 5(3), pages 401-436, Winter.
- Di Gioacchino, Debora & Ginebri, Sergio & Sabani, Laura, 2000. "Bribery and Public Debt Repudiation," Public Choice, Springer, vol. 105(3-4), pages 303-321, December.
- Calvo, Guillermo A, 1988. "Servicing the Public Debt: The Role of Expectations," American Economic Review, American Economic Association, vol. 78(4), pages 647-661, September.
- James A. Robinson & Thierry Verdier, 2013. "The Political Economy of Clientelism," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(2), pages 260-291, April.
- Robinson, James A & Verdier, Thierry, 2002. "The Political Economy of Clientelism," CEPR Discussion Papers 3205, C.E.P.R. Discussion Papers.
- James A. Robinson & Thierry Verdier, 2013. "The Political Economy of Clientelism," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-00846558, HAL.
- Giannetti, Mariassunta, 2003. " Bank-Firm Relationships and Contagious Banking Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(2), pages 239-261, April.
- Chang, Roberto, 2007. "Financial crises and political crises," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2409-2420, November.
- Roberto Chang, 2002. "Financial Crises and Political Crises," Departmental Working Papers 200229, Rutgers University, Department of Economics.
- Roberto Chang, 2005. "Financial Crises and Political Crises," NBER Working Papers 11779, National Bureau of Economic Research, Inc.
- Laura E. Kodres & Matthew Pritsker, 2002. "A Rational Expectations Model of Financial Contagion," Journal of Finance, American Finance Association, vol. 57(2), pages 769-799, April.
- Tabellini, Guido, 1991. "The Politics of Intergenerational Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 335-357, April.
- Guido Tabellini, 1989. "The Politics of Intergenerational Redistribution," NBER Working Papers 3058, National Bureau of Economic Research, Inc.
- Drazen, Allan & Grilli, Vittorio, 1993. "The Benefit of Crises for Economic Reforms," American Economic Review, American Economic Association, vol. 83(3), pages 598-607, June.
- Allan Drazen & Vittorio Grilli, 1990. "The Benefits of Crises for Economic Reforms," NBER Working Papers 3527, National Bureau of Economic Research, Inc.
- Drazen, A. & Grilli, V., 1991. "The Benefits of Crisis for Economic Reforms," Papers 27-91, Tel Aviv.
- Joseph H. Haslag & Rowena Pecchenino, 2005. "Crony Capitalism and Financial System Stability," Economic Inquiry, Western Economic Association International, vol. 43(1), pages 24-38, January.
- Frank Gunter, 1991. "Thomas Jefferson on the repudiation of public debt," Constitutional Political Economy, Springer, vol. 2(3), pages 283-301, September.
- Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
- Victor E. Vaugirard, 2004. "Informational Contagion of Sudden Stops in a Global Games Framework," Open Economies Review, Springer, vol. 15(2), pages 169-192, April. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:kap:openec:v:16:y:2005:i:1:p:77-99. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.