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Dealing with Debt: The 1930s and the 1980s

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  • Eichengreen, Barry
  • Portes, Richard

Abstract

This paper summarizes and extends the conclusions of a series of papers on the interwar experience of sovereign borrowing, default and debt readjustment. In explaining the incidence and extent of default, we highlight the importance of a range of factors, both economic and political. We find evidence that countries that interrupted debt service recovered more quickly from the Depression; were able subsequently to render substantially reduced transfers to their creditors; and did not experience access to capital markets in the 1940s and 1950s that was any more restricted than that available to debtors who fully serviced their debts throughout. Attempts at global schemes to short cut protracted bilateral negotiations foundered on disagreements over the funding and control of such schemes, casting doubt on the prospects for such global plans in the 1990s.
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Suggested Citation

  • Eichengreen, Barry & Portes, Richard, 1989. "Dealing with Debt: The 1930s and the 1980s," Department of Economics, Working Paper Series qt7666n7r4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  • Handle: RePEc:cdl:econwp:qt7666n7r4
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    Citations

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    Cited by:

    1. Michael D. Bordo, 2017. "An Historical Perspective on the Quest for Financial Stability and the Monetary Policy Regime," Economics Working Papers 17108, Hoover Institution, Stanford University.
    2. Marc Flandreau & Juan H. Flores & Norbert Gaillard & Sebastián Nieto-Parra, 2010. "The End of Gatekeeping: Underwriters and the Quality of Sovereign Bond Markets, 1815–2007," NBER Chapters, in: NBER International Seminar on Macroeconomics 2009, pages 53-92, National Bureau of Economic Research, Inc.
    3. Anna Gelpern & Ugo Panizza, 2022. "Enough Potential Repudiation: Economic and Legal Aspects of Sovereign Debt in the Pandemic Era," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 545-570, August.
    4. Bowe, M. & Dean, J.W., 1997. "Has the Market Solved the Sovereign-Debt Crisis?," Princeton Studies in International Economics 83, International Economics Section, Departement of Economics Princeton University,.
    5. Javier Díaz-Cassou & Aitor Erce-Domínguez & Juan J. Vázquez-Zamora, 2008. "The role of the IMF in recent sovereign debt restructurings: Implications for the policy of lending into arrears," Occasional Papers 0805, Banco de España.
    6. Mr. Jochen R. Andritzky & Julian Schumacher, 2019. "Long-Term Returns in Distressed Sovereign Bond Markets: How Did Investors Fare?," IMF Working Papers 2019/138, International Monetary Fund.
    7. Franke, Günter, 1990. "Avenues for the reduction of LDC-debt: An institutional analysis," Discussion Papers, Series II 100, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    8. de Aghion, Beatriz Armendariz & de Hinestrosa, Patricia Armendariz, 1995. "Debt relief, growth and price stability in Mexico," Journal of Development Economics, Elsevier, vol. 48(1), pages 135-149, October.
    9. Paul R. Krugman & Thomas Enders & William R. Rhodes, 1994. "LDC Debt Policy," NBER Chapters, in: American Economic Policy in the 1980s, pages 691-740, National Bureau of Economic Research, Inc.
    10. Nunnenkamp, Peter, 1989. "Capital drain, debt relief, and creditworthiness of developing countries," Kiel Working Papers 379, Kiel Institute for the World Economy (IfW Kiel).
    11. Balazs Szentes & Natalia Kovrijnykh, 2005. "A Theory of Debt Overhang and Buyback," 2005 Meeting Papers 447, Society for Economic Dynamics.
    12. Jean-Pierre Allegret, 2015. "6. Quelles sont les causes et les conséquences d’un défaut sur la dette publique ?," Regards croisés sur l'économie, La Découverte, vol. 0(2), pages 101-116.
    13. Mitchener, Kris & Trebesch, Christoph, 2021. "Sovereign Debt in the 21st Century: Looking Backward, Looking Forward," CEPR Discussion Papers 15935, C.E.P.R. Discussion Papers.
    14. Javier Díaz-Cassou & Aitor Erce-Domínguez & Juan J. Vázquez-Zamora, 2008. "Recent episodes of sovereign debt restructurings. A case-study approach," Occasional Papers 0804, Banco de España.

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