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3 - Sovereign Debt

Published online by Cambridge University Press:  19 October 2023

Simon Hinrichsen
Affiliation:
University of Copenhagen
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Summary

Chapter 3 discusses sovereign debt theory and practice. It goes through the history of sovereign debt and how the current theories of borrowing and lending developed in the 1980s. I argue that countries want to be part of global society, and that means they sometimes repay unsustainable debt. The chapter dives into why countries might default, when they might default, how often countries have defaulted, and what the economic and political costs are. I then describe what happens when countries need to restructure their sovereign debt, both in theory and with a practical guide for the process. Finally, in another technical section, I describe a sovereign debt model. The model explains when countries should have no willingness to repay their debt. It allows me to characterise a set of stylised macroeconomic facts that usually accompany sovereign debt defaults. The default set that comes out of the model states when countries should default. These facts and default set (not part of the technical section) are used in Chapters 6, 8, and 10. Chapter 3 is the last overview chapter; the rest are case studies.

Type
Chapter
Information
When Nations Can't Default
A History of War Reparations and Sovereign Debt
, pp. 41 - 85
Publisher: Cambridge University Press
Print publication year: 2023

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  • Sovereign Debt
  • Simon Hinrichsen, University of Copenhagen
  • Book: When Nations Can't Default
  • Online publication: 19 October 2023
  • Chapter DOI: https://doi.org/10.1017/9781009343978.003
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  • Sovereign Debt
  • Simon Hinrichsen, University of Copenhagen
  • Book: When Nations Can't Default
  • Online publication: 19 October 2023
  • Chapter DOI: https://doi.org/10.1017/9781009343978.003
Available formats
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Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

  • Sovereign Debt
  • Simon Hinrichsen, University of Copenhagen
  • Book: When Nations Can't Default
  • Online publication: 19 October 2023
  • Chapter DOI: https://doi.org/10.1017/9781009343978.003
Available formats
×