Sovereign Debt and Consumption Smoothing
This paper shows that whether or not a sovereign can borrow to smooth consump- tion depends both on how consumption smoothing is achieved, whether by contingent debt issuance or by contingent debt servicing, and on the penalty for debt repudiation. If a sovereign that repudiated its debt could not borrow again, but could continue to save and to dissave, then contingent debt issuance, without contingent debt servicing, cannot support a positive amount of uncollateralized sovereign debt. But, with this same penalty for repu- diation, contingent debt servicing supports a positive amount of uncollateralized sovereign debt.
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|Date of creation:||1997|
|Contact details of provider:|| Postal: Department of Economics, Brown University, Providence, RI 02912|
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- Eaton, Jonathan, 1993.
"Sovereign Debt: A Primer,"
World Bank Economic Review,
World Bank Group, vol. 7(2), pages 137-172, May.
- Jonathan Eaton, 1991. "Sovereign Debt: A Primer," Boston University - Institute for Economic Development 21, Boston University, Institute for Economic Development.
- Eaton, Jonathan, 1992. "Sovereign debt : a primer," Policy Research Working Paper Series 855, The World Bank.
- Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters,in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435 National Bureau of Economic Research, Inc.
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- Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1986. "The Pure Theory of Country Risk," NBER Working Papers 1894, National Bureau of Economic Research, Inc.
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- Grossman, Herschel I & Van Huyck, John B, 1988. "Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation, and Reputation," American Economic Review, American Economic Association, vol. 78(5), pages 1088-1097, December.
- Herschel I. Grossman & John B. Van Huyck, 1985. "Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation, and Reputation," NBER Working Papers 1673, National Bureau of Economic Research, Inc.
- Chari V. V. & Kehoe Patrick J., 1993. "Sustainable Plans and Debt," Journal of Economic Theory, Elsevier, vol. 61(2), pages 230-261, December.
- V. V. Chari & Patrick J. Kehoe, 1989. "Sustainable plans and debt," Staff Report 125, Federal Reserve Bank of Minneapolis.
- Jonathan Eaton & Mark Gersovitz, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Oxford University Press, vol. 48(2), pages 289-309. Full references (including those not matched with items on IDEAS)
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