Sovereign debt and incentives to default with uninsurable risks

Gaetano Bloise, Herakles Polemarchakis and Yiannis Vailakis

No 269718, Economic Research Papers from University of Warwick - Department of Economics

Abstract: Sovereign debt is not sustainable even in the presence of uninsurable risks; which extends the result of Bulow and Rogoff (1989). But the argument is not as general. Indeed, examples show that positive borrowing may be enforced even though the sovereign’s natural debt limits, corresponding to the most pessimistic evaluation of future endowment, are finite. Unsustainable sovereign debt in incomplete asset markets requires a strong version of high implied interest rates: the value of the most optimistic evaluation of future endowment is finite

Keywords: Financial Economics; International Development (search for similar items in EconPapers)
Pages: 30
Date: 2016-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://ageconsearch.umn.edu/record/269718/files/twerp_1107_polemarchakis.pdf (application/pdf)
https://ageconsearch.umn.edu/record/269718/files/t ... s.pdf?subformat=pdfa (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269718

DOI: 10.22004/ag.econ.269718

Access Statistics for this paper

More papers in Economic Research Papers from University of Warwick - Department of Economics
Bibliographic data for series maintained by AgEcon Search (aesearch@umn.edu).