Broner, Fernando A; Martin, Alberto; Ventura, Jaume - C.E.P.R. Discussion Papers - 2007
Conventional wisdom says that, in the absence of sufficient default penalties, sovereign risk constraints credit and … secondary markets. Once this assumption is relaxed, there is always an equilibrium in which sovereign risk is stripped of its …, sovereign risk neither constrains welfare nor lowers credit. At most, it creates some additional trade in secondary markets. The …