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  3. Journal of Economic Literature
  4. September 2009
  5. The Economics and Law of Sovereign Debt and Default

Journal of Economic Literature

ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)

The Economics and Law of Sovereign Debt and Default

  • Ugo Panizza
  • Federico Sturzenegger
  • Jeromin Zettelmeyer
Journal of Economic Literature
vol. 47, no. 3, September 2009
(pp. 651–98)
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Abstract

This paper surveys the recent literature on sovereign debt and relates it to the evolution of the legal principles underlying the sovereign debt market and the experience of the most recent debt crises and defaults. It finds limited support for theories that explain the feasibility of sovereign debt based on either external sanctions or exclusion from the international capital market and more support for explanations that emphasize domestic costs of default. The paper concludes that there remains a case for establishing institutions that reduce the cost of default but the design of such institutions is not a trivial task.

Citation

Panizza, Ugo, Federico Sturzenegger, and Jeromin Zettelmeyer. 2009. "The Economics and Law of Sovereign Debt and Default." Journal of Economic Literature, 47 (3): 651–98. DOI: 10.1257/jel.47.3.651

JEL Classification

  • F34 International Lending and Debt Problems
  • K33 International Law
  • O19 International Linkages to Development; Role of International Organizations
  • P33 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, and Aid