Journal Article
The politics of sovereign defaults
Abstract: In this article, we study the interplay between political factors and default decisions. First, we survey two branches of theoretical studies. One shows that governments may be willing to repay their debt because it is in the best interest of local agents with political power. The other one discusses how political turnover affects sovereign default risk. Second, we describe a large body of empirical studies that find evidence of the influence of political stability and other characteristics of a political system on default risk. Finally, we examine the role of political factors in five recent default episodes.
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Bibliographic Information
Provider: Federal Reserve Bank of Richmond
Part of Series: Economic Quarterly
Publication Date: 2010
Volume: 96
Issue: 3Q
Pages: 291-317