Domestic and external sovereign debt

Arbeitspapier

Why do countries tend to repay their domestic and external debt, even though the legal enforcement of the sovereign debt contract is limited? Contrary to conventional wisdom, we argue that temporary market exclusion after default is costly. When the domestic financial market is characterized by a scarcity of private saving instruments, a government can partition its debt market into domestic and external segments, by restricting capital flows, to exploit its market power. The government's market power mitigates the problem of limited commitment, by making default a more costly option. Consequently, it extends the government's external debt capacity. We replicate the domestic and external sovereign debt for non-advanced economies, by unveiling their link to financial repression.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Sveriges Riksbank Working Paper Series ; No. 345

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Financial Markets and the Macroeconomy ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General ; International Lending and Debt Problems ; International Financial Policy: Financial Transactions Tax; Capital Controls ; International Financial Markets ; General Financial Markets: Government Policy and Regulation ; National Debt; Debt Management; Sovereign Debt ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
• Thema: sovereign debt ; sovereign default ; financial repression ; financial development ; capital controls

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Di Casola, Paola ; Sichlimiris, Spyridon
• Ereignis: Veröffentlichung
• (wer): Sveriges Riksbank
• (wo): Stockholm
• (wann): 2017

Weitere Informationen

• Handle: http://hdl.handle.net/10419/189945
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ