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Private international debt with risk of repudiation

  • Karsten Jeske
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    The risk of repudiation plays a central role in the size and nature of international capital flows. In this paper the author addresses the question of whether, in a world of international capital flows with risk of default, strategic externalities provide a rationale for regulation of international borrowing. The author models centralized arrangements of international debt in which only governments borrow and lend internationally and decentralized arrangements in which individuals have access to international markets. The author shows that a centralized setup allows more international risk sharing than a decentralized setup.

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    File URL: http://www.frbatlanta.org/filelegacydocs/wp0116a.pdf
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    Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2001-16.

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    Date of creation: 2005
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    Handle: RePEc:fip:fedawp:2001-16
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    1. Giorgia Giovannetti & Albert Marcet & Ramon Marimon, 1993. "Growth, capital flows and enforcement constaints: The case of Africa," Economics Working Papers 22, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Timothy J. Kehoe & David K. Levine, 1992. "Debt constrained asset markets," Working Papers 445, Federal Reserve Bank of Minneapolis.
    3. Patrick J. Kehoe & Fabrizio Perri, 2002. "International Business Cycles with Endogenous Incomplete Markets," Econometrica, Econometric Society, vol. 70(3), pages 907-928, May.
    4. Jonathan Eaton & Raquel Fernandez, 1995. "Sovereign Debt," NBER Working Papers 5131, National Bureau of Economic Research, Inc.
    5. Bebchuk, Lucian Arye & Guzman, Andrew T, 1999. "An Economic Analysis of Transnational Bankruptcies," Journal of Law and Economics, University of Chicago Press, vol. 42(2), pages 775-808, October.
    6. Cole, Harold L. & English, William B., 1991. "Expropriation and direct investment," Journal of International Economics, Elsevier, vol. 30(3-4), pages 201-227, May.
    7. Eaton, Jonathan & Gersovitz, Mark, 1984. "A Theory of Expropriation and Deviations from Perfect Capital Mobility," Economic Journal, Royal Economic Society, vol. 94(373), pages 16-40, March.
    8. Jeremy Bulow & Kenneth Rogoff, 1998. "Sovereign Debt: Is to Forgive to Forget," Levine's Working Paper Archive 209, David K. Levine.
    9. Harold L. Cole & Patrick J. Kehoe, 1996. "Reputation spillover across relationships: reviving reputation models of debt," Staff Report 209, Federal Reserve Bank of Minneapolis.
    10. Fernando Alvarez & Urban J. Jermann, 1998. "Asset Pricing when Risk Sharing is Limited by Default," NBER Working Papers 6476, National Bureau of Economic Research, Inc.
    11. Fernando Alvarez & Urban J. Jermann, 2000. "Efficiency, Equilibrium, and Asset Pricing with Risk of Default," Econometrica, Econometric Society, vol. 68(4), pages 775-798, July.
    12. Andrew Atkeson, 2010. "International lending with moral hazard and risk of repudiation," Levine's Working Paper Archive 200, David K. Levine.
    13. 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 1088-97, December.
    14. Cole, Harold L. & English, William B., 1992. "Two-sided expropriation and international equity contracts," Journal of International Economics, Elsevier, vol. 33(1-2), pages 77-104, August.
    15. Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Wiley Blackwell, vol. 48(2), pages 289-309, April.
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