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A Constant Recontracting Model Of Sovereign Debt

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  • Bulow, Jeremy
  • Rogoff, Kenneth

Abstract

We present a dynamic model of international lending in which borrowers cannot commit to future repayments, and where debtors can sometimes 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 ren-egotiated in the future. Our bargaining-theoretic approach allows us to handle the effects ~f 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.

Suggested Citation

  • Bulow, Jeremy & Rogoff, Kenneth, 1988. "A Constant Recontracting Model Of Sovereign Debt," SSRI Workshop Series 292692, University of Wisconsin-Madison, Social Systems Research Institute.
  • Handle: RePEc:ags:uwssri:292692
    DOI: 10.22004/ag.econ.292692
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