The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Sovereign Debt

  • Kenneth M. Kletzer
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_2377

Abstract

The liabilities of sovereign states are not directly enforceable, for example by court-imposed transfer of collateral. Sovereign borrowing must be sustained by the prospect that indirect sanctions follow default. The credibility of sanctions for default and the roles of third parties and reputations for motivating repayment are discussed. The interaction of sovereignty and externalities between creditors complicates the renegotiation of sovereign debt. The importance of the collective action problem for debt restructuring is reviewed.

Keywords

Asymmetric commitment Asymmetric information Bankruptcy Bonds Collective action Commitment Consumption smoothing Debt restructuring Default Extensive-form games Free-rider problem Implicit contracts International capital flows International trade Moral hazard Permanent loan autarky Rationing Reputation Risk sharing Sanctions Sovereign debt Sovereign immunity Willingness to pay 
This is a preview of subscription content, log in to check access

Bibliography

  1. Brownlie, I. 2003. Principles of public international law, 6th ed. New York: Oxford University Press.Google Scholar
  2. Buchheit, L., and G. Gulati. 2000. Exit consents in sovereign bond exchanges. UCLA Law Review 48: 59–84.Google Scholar
  3. Bulow, J., and K. Rogoff. 1989a. A constant recontracting model of sovereign debt. Journal of Political Economy 97: 155–178.CrossRefGoogle Scholar
  4. Bulow, J., and K. Rogoff. 1989b. LDC debt: Is to forgive to forget? American Economic Review 79: 43–50.Google Scholar
  5. Cole, H., and P. Kehoe. 1998. Models of sovereign debt: Partial versus general reputations. International Economic Review 39: 55–70.CrossRefGoogle Scholar
  6. Eaton, J., and M. Gersovitz. 1981. Debt with potential repudiation: Theory and estimation. Review of Economic Studies 48: 289–309.CrossRefGoogle Scholar
  7. Eichengreen, B. 2003. Restructuring sovereign debt. Journal of Economic Perspectives 17(4): 75–98.CrossRefGoogle Scholar
  8. Eichengreen, B., and R. Portes. 1989. Setting defaults in the era of bond finance. World Bank Economic Review 3: 211–239.CrossRefGoogle Scholar
  9. Eichengreen, B., K. Kletzer, and A. Mody. 2004. Crisis resolution: Next steps. Brookings Trade Forum 2003, 279–337.Google Scholar
  10. Esteves, R. 2005. Quis custodiet quem? Sovereign debt and bondholders’ protection before 1914. Berkeley: Mimeo, Department of Economics, University of California.Google Scholar
  11. Grossman, H., and J. van Huyck. 1988. Sovereign debt as a contingent claim: Excusable default, repudiation, and reputation. American Economic Review 78: 1088–1097.Google Scholar
  12. Kletzer, K., and B. Wright. 2000. Sovereign debt as intertemporal barter. American Economic Review 90: 621–639.CrossRefGoogle Scholar
  13. Lindert, P., and P. Morton. 1989. How sovereign debt has worked. In Developing country debt and the world economy, ed. J. Sachs. Chicago: University of Chicago Press.Google Scholar
  14. Ozler, S. 1993. Have commercial banks ignored history? American Economic Review 83: 608–620.Google Scholar
  15. Reinhart, C., K. Rogoff, and M. Savastano. 2003. Debt intolerance. Brookings Papers on Economic Activity 2003(1): 1–74.CrossRefGoogle Scholar
  16. Tirole, J. 2002. Financial crises, liquidity and the international monetary system. Princeton: Princeton University Press.CrossRefGoogle Scholar
  17. Wallich, H. 1943. The future of Latin American dollar bonds. American Economic Review 33: 324–335.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Kenneth M. Kletzer
    • 1
  1. 1.