Article2009

The Economics and Law of Sovereign Debt and Default

Ugo G. Panizza · Federico Sturzenegger · Jeromin Zettelmeyer

562 citations0/0 files storedJournal of Economic Literature

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Global Financial Crisis and Policies Fiscal Policies and Political Economy Credit Risk and Financial Regulations

Abstract

This paper surveys the recent literature on sovereign debt and relates it to the evolution of the legal principles underlying the sovereign debt market and the experience of the most recent debt crises and defaults. It finds limited support for theories that explain the feasibility of sovereign debt based on either external sanctions or exclusion from the international capital market and more support for explanations that emphasize domestic costs of default. The paper concludes that there remains a case for establishing institutions that reduce the cost of default but the design of such institutions is not a trivial task.

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References

2019American Economic Review 1999The Twin Crises: The Causes of Banking and Balance-of-Payments Problems 1979On the Determination of the Public Debt 1981Debt with Potential Repudiation: Theoretical and Empirical Analysis 1999The Voracity Effect 2008Growth Dynamics: The Myth of Economic Recovery 2007Default Risk and Income Fluctuations in Emerging Economies 2004When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies

Cited by

2009The Costs of Sovereign Default 2013Systemic sovereign credit risk: Lessons from the U.S. and Europe 2013The Greek debt restructuring: an autopsy 2021Global Waves of Debt: Causes and Consequences 2013Financial Crises: Explanations, Types and Implications 2016SOVEREIGN DEBT RESTRUCTURINGS: PREEMPTIVE OR POST-DEFAULT 2010The elusive costs of sovereign defaults

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