Theory suggests that government should smooth taxes and spending, and adjustments in the level of debt should be gradual. Fiscal rules should therefore relate to deficits rather than debt. Rules should also reflect constraints on monetary policy. In normal times, rules should reflect political...

This chapter focuses on specific problems posed by sovereign debt (that is, debt incurred by governments, typically those of developing countries) to foreign investors seeking a competitive return. Most recently sovereign debt has taken the form primarily of loans from commercial banks, although...

We review the literature on sovereign debt. We organize our survey around three central questions: (1) Why do sovereign debtors ever repay their debts? (2) What burdens, in the form of distortions and inefficiencies, does sovereign debt impose? and (3) How might debt be restructured to reduce...