Foreign Debt, Capital Controls, and Secondary Markets: Theory and Evidence from Nazi Germany

Andrea Papadia and Claudio A. Schioppa

No 1992, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We investigate how internal distribution motives can interfere with the economic objectives of capital controls. In order to do this, we provide a model showing that elite capture can affect optimal debt repatriations and the management of official reserves under capital controls. Relying on these theoretical insights and a wealth of quantitative and qualitative historical evidence, we study one of history’s largest debt repatriations - that of 1930s Germany. We show that the authorities kept private repatriations under strict control, thus avoiding detrimental macroeconomic effects, while allowing discretionary repatriations in order to reap internal political benefits.

Keywords: Sovereign risk; capital controls; elite capture; Germany; Nazi regime; foreign debt; secondary markets (search for similar items in EconPapers)
JEL-codes: E65 F38 H63 N24 (search for similar items in EconPapers)
Pages: 68 p.
Date: 2022
New Economics Papers: this item is included in nep-his and nep-mac
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Related works:
Journal Article: Foreign Debt, Capital Controls, and Secondary Markets: Theory and Evidence from Nazi Germany (2024)
Working Paper: Foreign Debt, Capital Controls, and Secondary Markets: Theory and Evidence from Nazi Germany (2020)
Working Paper: Foreign debt, capital controls, and secondary markets: Theory and evidence from Nazi Germany (2020)
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