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Sovereign Debt

  • Jonathan Eaton
  • Raquel Fernandez

We review the literature on sovereign debt. We organize our survey around three central questions: (1) Why do sovereign debtors ever repay their debts? (2) What burdens, in the form of distortions and inefficiencies, does sovereign debt impose? and (3) How might debt be restructured to reduce these burdens? In grappling with the first question the literature has pointed to, and argued about, the roles of reputation, punishments, rewards, and renegotiation. In addressing the second the literature has asked whether sovereign debtors tend to borrow too much or to little, and how debt can distort the domestic economy. Answers to the third question include measures by creditors, by debtors, and by public institutions to reduce debt burdens.

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Paper provided by Boston University, Institute for Economic Development in its series Boston University - Institute for Economic Development with number 59.

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Date of creation: May 1995
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Handle: RePEc:fth:bosecd:59
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