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A general equilibrium model of sovereign borrowing and non-sovereign financial intermediation

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  • Mohr, Ernst

Abstract

In a general equilibrium model, international lending through a non-sovereign financial intermediary (a banking system) to a sovereign borrower is analyzed. Under very pessimistic assumptions, including a principal-agency type of incentive to load future intermediation with certain bancrupcy for the sake of present sovereign debt servicing, sustainable international lending that avoids both, repudiation and bancrupcy is determined. There is a plethora of roll-over and net-transfer steady-states. Compared to financial autarky, steady-state lending is capital depriving. Nevertheless, lending may be welfare improving in the creditor country and the world as a whole.

Suggested Citation

  • Mohr, Ernst, 1987. "A general equilibrium model of sovereign borrowing and non-sovereign financial intermediation," Discussion Papers, Series II 40, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    • Handle: RePEc:zbw:kondp2:40
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    References listed on IDEAS

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    1. Mohr, Ernst, 1988. "International borrowing and exhaustible resources : Note on a liquidity creditworthiness conflict," European Economic Review, Elsevier, vol. 32(6), pages 1385-1392, July.
    2. Bulow, Jeremy & Rogoff, Kenneth, 1989. "A Constant Recontracting Model of Sovereign Debt," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 155-178, February.
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    Cited by:

    1. Siebert, Horst, 1989. "Güterwirtschaftliche Anpassungsprozesse zur Lösung der Verschuldungsfrage," Kiel Working Papers 349, Kiel Institute for the World Economy (IfW Kiel).
    2. Siebert, Horst, 1988. "Ansatzpunkte zur Lösung der internationalen Verschuldungsfrage," Open Access Publications from Kiel Institute for the World Economy 1374, Kiel Institute for the World Economy (IfW Kiel).

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