This paper studies fiscal policy in a model of sovereign debt and default A time inconsistency problem arises: since the price of past debt cannot be affected by current fiscal policy and governments cannot credibly commit ...

We construct a dynamic equilibrium model to quantitatively study sovereign debt with contingent services and country risk spreads such that the benefits of defaulting are tempered by higher interest rates in the future. ...

Bulow and Rogoff (Am Econ Rev 79(1):43-50, 1989) show that lending to small countries cannot be supported merely on the country's 'reputation for repayment' if exclusion from future credit markets is the only consequence ...

Most models currently used to determine optimal foreign reserve holdings take the level of international debt as given. However, given the sovereign`s willingness-to-pay incentive problems, reserve accumulation may reduce ...

This paper analyses a small open economy that wants to borrow from abroad, cannot commit to repay debt but faces costs if it decides to default. The model generates analytical expressions for the impact of shocks on the ...

This paper reviews debt management strategies in Latin America from a positive and a normative perspective. It discusses the definition of the debt perimeter (what items should be considered to optimize the cost-risk ...