Default, Settlement, and Signalling: Lending Resumption in a Reputational Model of Sovereign Debt

Harold Cole, James Dow and William B English

International Economic Review, 1995, vol. 36, issue 2, 365-85

Abstract: This paper develops a simple model of sovereign debt in which defaulting nations are excluded from capital markets and regain access by making partial repayments. This implication of the model is consistent with the historical evidence that defaulting countries return to international loan markets soon after a settlement but after varying periods of exclusion. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1995
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Working Paper: Default, settlement, and signalling: lending resumption in a reputational model of sovereign debt (1994)
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