Models of sovereign debt: partial vs. general reputations
Bulow and Rogoff (1989b) show that as long as governments can earn the market rate of return by saving abroad, standard reputation models cannot support debt. We argue that these standard reputation models are partial in the sense that actions of agents in one arena affect reputation in that arena only. We develop a general model of reputation in which if a government is viewed as untrustworthy in one relationship, this government will be viewed as untrustworthy in other relationships. We show that our general model of reputation can support large amounts of debt.
|Date of creation:||1997|
|Contact details of provider:|| Postal: 90 Hennepin Avenue, P.O. Box 291, Minneapolis, MN 55480-0291|
Phone: (612) 204-5000
Web page: http://minneapolisfed.org/
More information through EDIRC
|Order Information:||Web: http://www.minneapolisfed.org/pubs/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Harold L. Cole & James Dow & William B. English, 1994.
"Default, settlement, and signalling: lending resumption in a reputational model of sovereign debt,"
180, Federal Reserve Bank of Minneapolis.
- Cole, Harold L & Dow, James & English, William B, 1995. "Default, Settlement, and Signalling: Lending Resumption in a Reputational Model of Sovereign Debt," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 365-385, May.
- Wolfgang Pesendorfer, 1992. "Sovereign Debt: Forgiving and Forgetting Reconsidered," Discussion Papers 1016, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Atkeson, Andrew, 1991.
"International Lending with Moral Hazard and Risk of Repudiation,"
Econometric Society, vol. 59(4), pages 1069-1089, July.
- Andrew Atkeson, 2010. "International lending with moral hazard and risk of repudiation," Levine's Working Paper Archive 200, David K. Levine.
- Cole, Harold L. & Kehoe, Patrick J., 1995.
"The role of institutions in reputation models of sovereign debt,"
Journal of Monetary Economics,
Elsevier, vol. 35(1), pages 45-64, February.
- Harold L. Cole & Patrick J. Kehoe, 1994. "The role of institutions in reputation models of sovereign debt," Staff Report 179, Federal Reserve Bank of Minneapolis.
- Jeremy A.Rogoff Bulow & Kenneth, 1986.
"A Constant Recontracting Model of Sovereign Debt,"
University of Chicago - George G. Stigler Center for Study of Economy and State
43, Chicago - Center for Study of Economy and State.
- Bulow, Jeremy & Rogoff, Kenneth S., 1989. "A Constant Recontracting Model of Sovereign Debt," Scholarly Articles 12491028, Harvard University Department of Economics.
- Jeremy I. Bulow & Kenneth Rogoff, 1986. "A Constant Recontracting Model of Sovereign Debt," NBER Working Papers 2088, National Bureau of Economic Research, Inc.
- 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.
- Kreps, David M. & Wilson, Robert, 1982.
"Reputation and imperfect information,"
Journal of Economic Theory,
Elsevier, vol. 27(2), pages 253-279, August.
- Diamond, Douglas W, 1989.
"Reputation Acquisition in Debt Markets,"
Journal of Political Economy,
University of Chicago Press, vol. 97(4), pages 828-862, August.
- 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.
- Raquel Fernandez & Robert W. Rosenthal, 1990. "Strategic Models of Sovereign-Debt Renegotiations," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 331-349.
When requesting a correction, please mention this item's handle: RePEc:fip:fedmwp:580. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jannelle Ruswick)
If references are entirely missing, you can add them using this form.