IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

A Sovereign Debt Model with Trade Credit and Reserves

  • Kohlscheen, Emanuel

    (University of Warwick)

  • O'Connell, Stephen A.

    (Swarthmore College, PA)

This paper analyzes sovereign debt in an economy in which the availability of short-term trade credit reduces international trade transaction costs. The model highlights the distinction between gross and net international reserve positions. Borrowed reserves provide net wealth and liquidity services during a negotiation, as long as they are not fully attachable by creditors. Moreover, reserves strengthen the bargaining position of a country by shielding it from a cut-off from short-term trade credits thereby diminishing its degree of impatience to conclude a negotiation. We show that competitive banks do lend for the accumulation of borrowed reserves, which provide partial insurance

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2006/twerp_743.pdf
Download Restriction: no

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 743.

as
in new window

Length: 58 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:wrk:warwec:743
Contact details of provider: Postal: CV4 7AL COVENTRY
Phone: +44 (0) 2476 523202
Fax: +44 (0) 2476 523032
Web page: http://www2.warwick.ac.uk/fac/soc/economics/

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Jonathan Eaton & Raquel Fernandez, 1995. "Sovereign Debt," Boston University - Institute for Economic Development 59, Boston University, Institute for Economic Development.
  2. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," NBER Working Papers 7265, National Bureau of Economic Research, Inc.
  3. Stephanie Schmitt-Grohe & Martin Uribe, 2002. "Optimal Fiscal and Monetary Policy Under Sticky Prices," NBER Working Papers 9220, National Bureau of Economic Research, Inc.
  4. Jeremy I. Bulow & Kenneth Rogoff, 1988. "Sovereign Debt: Is To Forgive To Forget?," NBER Working Papers 2623, National Bureau of Economic Research, Inc.
  5. Aizenman, Joshua & Marion, Nancy P., 2003. "International Reserve Holdings with Sovereign Risk and Costly Tax Collection," Santa Cruz Center for International Economics, Working Paper Series qt9s7978n1, Center for International Economics, UC Santa Cruz.
  6. Van Wijnbergen, Sweder, 1990. "Cash/debt buy-backs and the insurance value of reserves," Journal of International Economics, Elsevier, vol. 29(1-2), pages 123-131, August.
  7. Maxim Engers & Jonathan Eaton, 1999. "Sanctions: Some Simple Analytics," American Economic Review, American Economic Association, vol. 89(2), pages 409-414, May.
  8. Jeremy I. Bulow & Kenneth Rogoff, 1987. "A Constant Recontracting Model of Sovereign Debt," NBER Working Papers 2088, National Bureau of Economic Research, Inc.
  9. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
  10. Andrew K. Rose, 2002. "One Reason Countries Pay their Debts: Renegotiation and International Trade," NBER Working Papers 8853, National Bureau of Economic Research, Inc.
  11. Cohen, Daniel & Sachs, Jeffrey, 1986. "Growth and external debt under risk of debt repudiation," European Economic Review, Elsevier, vol. 30(3), pages 529-560, June.
  12. Sturzenegger, Federico & Zettelmeyer, Jeromin, 2008. "Haircuts: Estimating investor losses in sovereign debt restructurings, 1998-2005," Journal of International Money and Finance, Elsevier, vol. 27(5), pages 780-805, September.
  13. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  14. Rudiger Dornbusch, 1984. "Argentina Since Martinez De Hoz," NBER Working Papers 1466, National Bureau of Economic Research, Inc.
  15. Sutton, John, 1986. "Non-cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 709-24, October.
  16. 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.
  17. Frenkel, Jacob A & Jovanovic, Boyan, 1981. "Optimal International Reserves: A Stochastic Framework," Economic Journal, Royal Economic Society, vol. 91(362), pages 507-14, June.
  18. Detragiache, Enrica, 1996. "Fiscal Adjustment and Official Reserves in Sovereign Debt Negotiations," Economica, London School of Economics and Political Science, vol. 63(249), pages 81-95, February.
  19. 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.
  20. Andrew Atkeson, 2010. "International lending with moral hazard and risk of repudiation," Levine's Working Paper Archive 200, David K. Levine.
  21. Fernandez, Raquel & Rosenthal, Robert W, 1990. "Strategic Models of Sovereign-Debt Renegotiations," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 331-49, July.
  22. Lucas, Robert E B, 1979. "Sharing, Monitoring, and Incentives: Marshallian Misallocation Reassessed," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 501-21, June.
  23. Hellwig, Martin, 1986. "'The pure theory of country risk' by J. Eaton, M. Gersovitz and J. Stiglitz," European Economic Review, Elsevier, vol. 30(3), pages 521-527, June.
  24. Kimbrough, Kent P, 1986. "Inflation, Employment, and Welfare in the Presence of Transactions Costs," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(2), pages 127-40, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wrk:warwec:743. 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: (Helen Neal)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.