Sovereign Debt: Forgiving and Forgetting Reconsidered

Arbeitspapier

In this note we show that even if after default a sovereign can make deposits on a Swiss bank account, the exclusion from future debt is sufficient to deter a patient country from default. In contrast to the work by Bulow and Rogoff (1989) we assume that there is a fixed set of standard assets on the world financial markets in which the country can trade. In this setting the exclusion from future borrowing may seriously limit a country's ability to smooth consumption. Therefore the traditional reputational logic can be applied.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper ; No. 1016

Classification and Topics

• Classification: Wirtschaft

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Pesendorfer, Wolfgang
• Event: Veröffentlichung
• (who): Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science
• (where): Evanston, IL
• (when): 1992

Further information

• Handle: http://hdl.handle.net/10419/221373