This paper develops a stochastic dynamic politico-economic model of sovereign debt to analyze the interaction of sovereign default risk and political turnover. Two parties differ in their preferred size of public spending which is financed by taxes and external debt. Electoral outcomes are...

One possible explanation for the European sovereign debt crises is that the European Economic and Monetary Union (EMU) gave rise to consolidation fatigue or even deliberate over-borrowing. This paper explores the validity of this explanation by studying how three decisive stages in the history...

International Financial Institutions provide temporary balance-of-payment support contingent on the implementation of specific macroeconomic policies. While several emerging markets repeatedly used conditional assistance, sovereign defaults occurred. This paper develops a dynamic stochastic...