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A Constant Recontracting Model of Sovereign Debt

Jeremy Bulow and Kenneth Rogoff

Scholarly Articles from Harvard University Department of Economics

Abstract: We present a dynamic model of international lending in which borrowers cannot commit to future repayments and in which debtors can sometimes successfully negotiate partial defaults or "rescheduling agreements." All parties in a debt rescheduling negotiation realize that today's rescheduling agreement may itself have to be renegotiated in the future. Our bargaining-theoretic approach allows us to handle the effects of uncertainty on sovereign debt contracts in a much more satisfactory way than in earlier analyses. The framework is readily extended to analyze the conflicting interests of different lenders and of banks and creditor country taxpayers.

Date: 1989
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Published in Journal of Political Economy -Chicago-

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Related works:
Working Paper: A Constant Recontracting Model Of Sovereign Debt (1988) Downloads
Working Paper: A Constant Recontracting Model of Sovereign Debt (1986) Downloads
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