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Sovereign Debt

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  • Jonathan Eaton
  • Raquel Fernandez

Abstract

We review the literature on sovereign debt. We organize our survey around three central questions: (1) Why do sovereign debtors ever repay their debts? (2) What burdens, in the form of distortions and inefficiencies, does sovereign debt impose? and (3) How might debt be restructured to reduce these burdens? In grappling with the first question the literature has pointed to, and argued about, the roles of reputation, punishments, rewards and renegotiation. In addressing the second the literature has asked whether sovereign debtors tend to borrow too much or too little, and how debt can distort the domestic economy. Answers to the third question include measures by creditors, by debtors, and by public institutions to reduce debt burdens.

Suggested Citation

  • Jonathan Eaton & Raquel Fernandez, 1995. "Sovereign Debt," NBER Working Papers 5131, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5131
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    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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