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The political economy of strategic default: Sweden and the international capital markets, 1810–1830

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  • Patrik Winton

Abstract

This article examines the commitment mechanisms which guided sovereign borrowing during the Napoleonic Wars by analyzing Sweden's default on its external debt in 1812. The default was driven by internal political bargaining concerning the division of resources, and the availability of subsidies provided by the major European powers. Thus, the Swedish government and the Diet made strategic choices when deciding which debts to pay. The reputational mechanisms and the creditors’ attempts to force the Swedish state to honor its commitments did not work when the government had access to foreign subsidies.

Suggested Citation

  • Patrik Winton, 2016. "The political economy of strategic default: Sweden and the international capital markets, 1810–1830," European Review of Economic History, European Historical Economics Society, vol. 20(4), pages 410-428.
    • Handle: RePEc:oup:ereveh:v:20:y:2016:i:4:p:410-428.
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    File URL: http://hdl.handle.net/10.1093/ereh/hew009
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    References listed on IDEAS

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    8. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    9. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Chapter 1," MPRA Paper 17452, University Library of Munich, Germany.
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    Cited by:

    1. Pandey, Dharen Kumar & Lucey, Brian M. & Kumar, Satish, 2023. "Border disputes, conflicts, war, and financial markets research: A systematic review," Research in International Business and Finance, Elsevier, vol. 65(C).

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