Why do countries default? This seemingly simple question has yet to be adequately answered in the literature. Indeed, prevailing modelling strategies compel the to choose between two unappealing model features: depending on the cost of default selected by the modeler, either the debt ratios are...

We distinguish two types of debt crises: those that are the outcome of exogenous shocks (to productivity growth for instance) and those that are endogenously created, either by self-fulfilling panic in financial markets or by the reckless behavior of "Panglossian" borrowers. After Krugman, we...

We distinguish two attitudes towards debt. The attitude of prudent borrowers, which attempt to stabilize their debts to low levels, even in the event of a bad shock, and what we call, after Krugman, "Panglossian" borrowers, which only focus on the best of their growth prospects, and rationally...