Over the last two centuries, bountiful years of lending have frequently been followed by retrenchment and default. Debt rescheduling has repeatedly involved bargaining between interdependent debtors and lenders, with the stakes being the division of the costs of restoring normal financial intercourse. These protagonists have sought to optimize their bargaining in light of their existing international power and domestic political positions. But debtors and lenders have also sought to improve their prospects through efforts to manipulate both their own and their opponents' bargaining position. Moreover, negotiations over repayment and lending have often attracted the interest and intervention of creditor governments and international organizations. Thus, what might be seen as a basically economic problem has been fraught with political repercussions.

Economists who have written about debt rescheduling generally focus on debtors' incentives to repay loans in view of prospects for additional financing and lenders' willingness to extend new loans in light of the probability that debtors will service their loans. But their analytical models have focused primarily on the economic calculations made by debtors and lenders, ignoring important political and strategic issues that sovereign debt rescheduling raises. In addition, these models have rarely been tested systematically across a range of cases. For their part, political scientists have studied the domestic consequences of adjustment programs, but have generally failed to link domestic adjustment decisions to an investigation of the international bargaining process.