The political economy of strategic default: Sweden and the international capital markets, 1810–1830

Patrik Winton

European Review of Economic History, 2016, vol. 20, issue 4, 410-428

Abstract: This article examines the commitment mechanisms which guided sovereign borrowing during the Napoleonic Wars by analyzing Sweden's default on its external debt in 1812. The default was driven by internal political bargaining concerning the division of resources, and the availability of subsidies provided by the major European powers. Thus, the Swedish government and the Diet made strategic choices when deciding which debts to pay. The reputational mechanisms and the creditors’ attempts to force the Swedish state to honor its commitments did not work when the government had access to foreign subsidies.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ereveh:v:20:y:2016:i:4:p:410-428.

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