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A Constant Recontracting Model of Sovereign Debt

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  • Bulow, Jeremy
  • Rogoff, Kenneth

Abstract

The authors present a dynamic model of international lending in whi ch borrowers cannot commit to future repayments and debtors can sometime s successfully negotiate partial defaults or "rescheduling agreements." All parties in a debt rescheduling negotiation realize that today's rescheduling agreement may itself have to be renegotiated in the future. The authors' bargaining-theoretic approach allows them to handle the effects of uncertainty on sovereign debt contracts in a much more satisfactory way than in earlier analyses. The framework is readily extended to analyze the conflicting interests of different lenders, and of banks and creditor-country taxpayers. Copyright 1989 by University of Chicago Press.

Suggested Citation

  • Bulow, Jeremy & Rogoff, Kenneth, 1989. "A Constant Recontracting Model of Sovereign Debt," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 155-178, February.
    • Handle: RePEc:ucp:jpolec:v:97:y:1989:i:1:p:155-78
    DOI: 10.1086/261596
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