Why would a sovereign government, immune from bankruptcy procedures and with few assets that could be seized in the event of a default, ever repay foreign creditors? And, correspondingly, why do foreign creditors lend to sovereigns? This paper finds general conditions under which, even in the...

A number of countries have issued sovereign debt instruments indexed to real variables in recent years. This type of contracts could improve risk sharing between debtor countries and international creditors and diminish the probability of occurrence of debt crises. This paper characterizes the...

Sovereign defaults are associated with declines in defaulting countries trade. Are these declines the result of trade sanctions as the trade sanctions argument of sovereign borrowing would suggest? We devise an empirical strategy to evaluate this issue based on the idea that if trade sanctions...

During sovereign debt crises, even after controlling for the decline in relevant macroeconomic variables, both foreign and domestic credit to the private sector decline. This paper presents a mechanism through which sovereign defaults can lead to this decline, even if domestic agents do not hold...

In times of crises, sovereign debt repayment typically depends on the implementation of fiscal programs. In order to implement these programs, governments usually need to garner some political support. The literature of sovereign defaults has not paid attention to the presence of political...

Following a sovereign default, governments are usually unable to borrow from international credit markets for some time. The period of "exclusion" has varied from more than twenty years following some default events to less than a year in others. Using a unique dataset on sovereign bond...

A sovereign default is sometimes perceived by economic policy makers as a jump into the unkown. The main piece of information missing is what the costs of a sovereign default are going to be and how they arise. Knowing this is crucial when trying to evaluate how far a country should go to avoid...

This paper studies resource misallocation in the Argentine manufacturing (1997-2002) sector using the methodology of Hsieh and Klenow (2008). The study shows that the potential gains in terms of aggregate total factor productivity of equalizing marginal productivities of factor inputs across...