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Sovereign Debt

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  • Aguiar, Mark
  • Amador, Manuel

Abstract

In this chapter, we use a benchmark limited-commitment model to explore key issues in the economics of sovereign debt. After highlighting conceptual issues that distinguish sovereign debt as well as reviewing a number of empirical facts, we use the model to discuss debt overhang, risk-sharing, and capital flows in an environment of limited enforcement. We also discuss recent progress on default and renegotiation; self-fulfilling debt crises; and incomplete markets and their quantitative implications. We conclude with a brief assessment of the current state of the literature and highlight some directions for future research.

Suggested Citation

  • Aguiar, Mark & Amador, Manuel, 2014. "Sovereign Debt," Handbook of International Economics, Elsevier.
  • Handle: RePEc:eee:intchp:4-647
    DOI: 10.1016/B978-0-444-54314-1.00011-2
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    Cited by:

    1. Pierre-Olivier Gourinchas & Thomas Philippon & Dimitri Vayanos, 2017. "The Analytics of the Greek Crisis," NBER Macroeconomics Annual, University of Chicago Press, vol. 31(1), pages 1-81.
    2. repec:eee:macchp:v2-1697 is not listed on IDEAS
    3. Gente, Karine & León-Ledesma, Miguel A. & Nourry, Carine, 2015. "External constraints and endogenous growth: Why didn't some countries benefit from capital flows?," Journal of International Money and Finance, Elsevier, vol. 56(C), pages 223-249.
    4. Gilles Dufrénot & Anne-Charlotte Paret, 2016. "Power-Law Distribution in the Debt-to-Fiscal Revenue Ratio: Empirical Evidence and a Theoretical Model," Working Papers halshs-01357797, HAL.
    5. Trebesch, Christoph & Zabel, Michael, 2017. "The output costs of hard and soft sovereign default," European Economic Review, Elsevier, vol. 92(C), pages 416-432.
    6. Krishnamurthy, Arvind & Nagel, Stefan & Vissing-Jorgensen, Annette, 2017. "ECB Policies Involving Government Bond Purchases: Impact and Channels," Research Papers repec:ecl:stabus:3578, Stanford University, Graduate School of Business.
    7. Gourinchas, Pierre-Olivier & Philippon, Thomas & Vayanos, Dimitri, 2016. "The analytics of the Greek crisis: celebratory centenary issue," LSE Research Online Documents on Economics 67368, London School of Economics and Political Science, LSE Library.
    8. Stasavage, David, 2016. "What we can learn from the early history of sovereign debt," Explorations in Economic History, Elsevier, vol. 59(C), pages 1-16.
    9. Aguiar, M. & Chatterjee, S. & Cole, H. & Stangebye, Z., 2016. "Quantitative Models of Sovereign Debt Crises," Handbook of Macroeconomics, Elsevier.
    10. Diego J. Perez, 2015. "Sovereign Debt, Domestic Banks and the Provision of Public Liquidity," Discussion Papers 15-016, Stanford Institute for Economic Policy Research.

    More about this item

    Keywords

    Sovereign debt; Debt overhang; Default;

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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