Foreign debt, capital controls, and secondary markets: Theory and evidence from Nazi Germany

Andrea Papadia and Claudio A. Schioppa

No 25, Working Papers from German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin

Abstract: We show how elite capture affects optimal debt repatriations and management of official reserves under capital controls, bridging literature on debt buybacks and secondary markets. The model we provide guides our study of one of history's largest debt repatriations -in 1930s Germany. Authorities kept private repatriations under strict control -avoiding detrimental macroeconomic effects- while allowing discretionary repatriations so to reap internal political benefits. German assets exhibited large spreads between their domestic and foreign prices, granting arbitrage profits to those who had forex access. New data reveals that spread dynamics were affected by the impact of capital controls on secondary markets.

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)
Date: 2020
New Economics Papers: this item is included in nep-his
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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 (2022)
Working Paper: Foreign Debt, Capital Controls, and Secondary Markets: Theory and Evidence from Nazi Germany (2020)
Working Paper: Foreign Debt and Secondary Markets: The Case of Interwar Germany (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:pp1859:25

DOI: 10.18452/22060

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