Private International Debt with Risk of Repudiation
The risk of repudiation plays a central role in determining the size of international capital flows. In this paper I compare a centralized arrangement for international debt, where only governments borrow and lend internationally, with a decentralized arrangement, where individual borrowers have access to international capital markets. I show that a centralized setup allows more international risk sharing and higher welfare than a decentralized setup. That is, there is a positive role for government regulation of international borrowing.
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- Harold L. Cole & Patrick J. Kehoe, 1996. "Reputation spillover across relationships: reviving reputation models of debt," Staff Report 209, Federal Reserve Bank of Minneapolis.
- Harold L. Cole & Patrick J. Kehoe, 1996. "Reputation Spillover Across Relationships with Enduring and Transient Beliefs: Reviving reputation Models of Debt," NBER Working Papers 5486, National Bureau of Economic Research, Inc.
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