Crisis Costs and Incentives to Repay Sovereign Debt

Michael Chui and Prasanna Gai

in Private Sector Involvement and International Financial Crises

Published in print January 2005 | ISBN: 9780199267750
Published online July 2005 | e-ISBN: 9780191602504 | DOI:
Crisis Costs and Incentives to Repay Sovereign Debt

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Examines the willingness of sovereign debtors to repay their debts and the penalties that creditors can impose on debtors to encourage repayment. The seminal models of Eaton and Gersovitz (1981) and Bulow and Rogoff (1989) are discussed and the role played by reputation and sanctions in encouraging repayment is considered.

Keywords: direct sanctions; reputation; sovereign debt; willingness to repay

Chapter.  3308 words. 

Subjects: Financial Markets

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