Staff Report 180

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Default, Settlement, and Signalling: Lending Resumption in a Reputational Model of Sovereign Debt

Harold L. Cole - Consultant
James Dow
William B. English

Published September 1, 1994

Abstract
This paper develops a simple model of sovereign debt in which defaulting nations are excluded from capital markets and regain access by making partial repayments. This is consistent with the historical evidence that defaulting countries return to international loan markets soon after a settlement, but after varying periods of exclusion.


Published In: International Economic Review (Vol. 36, No. 2, May 1995, pp. 365-385)

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