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Sovereign Debt: A Review

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  • Mark Aguiar
  • Manuel Amador

Abstract

In this chapter, we use a benchmark limited-commitment model to explore key issues in the economics of sovereign debt. After highlighting conceptual issues that distinguish sovereign debt as well as reviewing a number of empirical facts, we use the model to discuss debt overhang, risk sharing, and capital flows in an environment of limited enforcement. We also discuss recent progress on default and renegotiation; self-fulfilling debt crises; and incomplete markets and their quantitative implications. We conclude with a brief assessment of the current state of the literature and highlight some directions for future research.

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  • Mark Aguiar & Manuel Amador, 2013. "Sovereign Debt: A Review," NBER Working Papers 19388, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19388
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    Cited by:

    1. Vivian Norambuena, 2015. "Sovereign Debt Default: Are Countries Trapped by Their Own Default History?," Working Papers wp416, University of Chile, Department of Economics.
    2. Arellano, Cristina & Maliar, Lilia & Maliar, Serguei & Tsyrennikov, Viktor, 2016. "Envelope condition method with an application to default risk models," Journal of Economic Dynamics and Control, Elsevier, vol. 69(C), pages 436-459.
    3. Golosov, M. & Tsyvinski, A. & Werquin, N., 2016. "Recursive Contracts and Endogenously Incomplete Markets," Handbook of Macroeconomics, Elsevier.
    4. Isabelle Joumard & Peter Hoeller & Jean-Marc Fournier & Hermes Morgavi, 2017. "Public debt in India: Moving towards a prudent level?," OECD Economics Department Working Papers 1400, OECD Publishing.
    5. Arora, Mohit, 2016. "Changing Rules of the Game of Global Finance: Glimpses from a Sovereign Debt Restructuring Episode," MPRA Paper 73181, University Library of Munich, Germany.
    6. Philipp Harms & Joachim Lutz, 2014. "Foreign vs. domestic public debt and the composition of government expenditure: A political-economy approach," Working Papers 1415, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 20 Nov 2014.

    More about this item

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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