Gunboats, Reputation, and Sovereign Repayment: Lessons from the Southern Confederacy

Marc Weidenmier ()

No 10960, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many states that formed the Southern Confederacy defaulted on sovereign debt sold in international capital markets during the 1840s. The Confederacy also elected President Jefferson Davis, who openly advocated the repudiation of U.S. states' debts while a member of Congress. Despite its poor credit record, the Confederate government managed to float cotton bonds in England that constituted under two percent of its expenditures. The bonds were largely issued to settle overdue debts with gun contractors who had cut off trade credit. The South serviced the bonds as late as March 1865, a time of domestic hyperinflation and weeks before the fall of Richmond. Although the Confederate experience shows that trade sanctions can promote debt repayment, the gunboat model can only account for a small amount of lending. A reputation or another type of sanction would be necessary to support higher levels of lending in international capital markets.

JEL-codes: F34 N2 (search for similar items in EconPapers)
Date: 2004-12
New Economics Papers: this item is included in nep-his
Note: DAE
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Citations: View citations in EconPapers (1)

Published as Weidenmier, Marc D. "Gunboats, Reputation, And Sovereign Repayment: Lessons From The Southern Confederacy," Journal of International Economics, 2005, v66(2,Jul), 407-422.

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