Default, Settlement, and Signalling: Lending Resumption in a Reputational Model of Sovereign Debt.

This paper develops a simple model of sovereign debt in which defaulting nations are excluded from capital markets and regain access by making partial repayments. This implication of the model is consistent with the historical evidence that defaulting countries return to international loan markets soon after a settlement but after varying periods of exclusion. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.