Sovereign Debt and Consumption Smoothing / Herschel I. Grossman, Taejoon Han.

Format:

Book

Author/Creator:

Grossman, Herschel I.

Contributor:

National Bureau of Economic Research.

Han, Taejoon.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5997.

NBER working paper series no. w5997

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1997.

Summary:

This paper shows that whether or not a sovereign can borrow to smooth consumption depends both on how consumption smoothing is achieved, whether by contingent debt issuance or by contingent debt servicing, and on the exact nature of the penalty for debt repudiation. If a sovereign that repudiated its debt could not borrow again, but could continue to save and to dissave, then contingent debt issuance, without contingent debt servicing, cannot support a positive amount of uncollateralized sovereign debt. But, under this same specification of the penalty for repudiation, contingent debt servicing supports a positive amount of uncollateralized sovereign debt.

Notes:

Print version record

April 1997.