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Sovereign Debt: Is to Forgive to Forget

  • Jeremy Bulow
  • Kenneth Rogoff

This paper shows that, under fairly general conditions, lending to small countries must be supported by the direct sanctions available to creditors and cannot be supported by a country's "reputation for repayment." This distinction is critically important for understanding the true underlying nature of sovereign lending contracts and for comparing policy alternatives for dealing with the developing country debt problem. Copyright 1989 by American Economic Association.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 209.

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Date of creation: 15 Apr 1998
Date of revision:
Handle: RePEc:cla:levarc:209
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  1. Eaton, Jonathan & Gersovitz, Mark & Stiglitz, Joseph E., 1986. "The pure theory of country risk," European Economic Review, Elsevier, vol. 30(3), pages 481-513, June.
    • 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.
  2. Bulow, Jeremy & Rogoff, Kenneth, 1989. "A Constant Recontracting Model of Sovereign Debt," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 155-78, February.
  3. repec:oup:restud:v:48:y:1981:i:2:p:289-309 is not listed on IDEAS
  4. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
  5. Peter H. Lindert & Peter J. Morton, 1989. "How Sovereign Debt Has Worked," NBER Chapters, in: Developing Country Debt and the World Economy, pages 225-236 National Bureau of Economic Research, Inc.
    • Peter H. Lindert & Peter J. Morton, 1989. "How Sovereign Debt Has Worked," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 1: The International Financial System, pages 39-106 National Bureau of Economic Research, Inc.
  6. Kletzer, Kenneth M, 1984. "Asymmetries of Information and LDC Borrowing with Sovereign Risk," Economic Journal, Royal Economic Society, vol. 94(374), pages 287-307, June.
  7. Maurice Obstfeld, 1985. "Capital Mobility in the World Economy: Theory and Measurement," NBER Working Papers 1692, National Bureau of Economic Research, Inc.
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