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Sovereign Debt

  • Eaton, J.
  • Fernandez, R.

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 - Department of Economics in its series Papers with number 37.

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Length: 59 pages
Date of creation: 1995
Date of revision:
Handle: RePEc:fth:bostec:37
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Web page: http://www.bu.edu/econ/

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