Sovereign Debt


Aguiar, Mark, and Manuel Amador. “Sovereign Debt”. Handbook of International Economics Vol 4. Elsevier, 2014. Print.
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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.

Last updated on 08/25/2014