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.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 647-687 |
| Number of pages | 41 |
| Journal | Handbook of International Economics |
| Volume | 4 |
| DOIs | |
| State | Published - Jan 1 2015 |
Keywords
- Debt overhang
- Default
- Sovereign debt