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The terms of trade, repudiation and default on sovereign debt

Author

Listed:
  • Michael Bleaney

    (University of Nottingham)

Abstract

A poor country with volatile export prices borrows in international markets. When debt is denominated in foreign currency, there is a temptation to repudiate when export prices are low. Excusable partial defaults reduce this temptation, and help to support lending. The cases of debt denominated in domestic currency, and indexed to (a) consumer or (b) export prices, and (c) volatile output are also examined.

Suggested Citation

  • Michael Bleaney, 2008. "The terms of trade, repudiation and default on sovereign debt," Economics Bulletin, AccessEcon, vol. 6(22), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-08f30010
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    File URL: http://www.accessecon.com/pubs/EB/2008/Volume6/EB-08F30010A.pdf
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    Cited by:

    1. Michael Bleaney & Veronica Veleanu, 2017. "Currency risk in corporate bond spreads in the eurozone," Discussion Papers 2017/07, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    2. Gu, Grace Weishi, 2015. "A Tale of Two Countries: Sovereign Default, Exchange Rate, and Trade," MPRA Paper 61900, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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