Diskussionsbeiträge: Serie II, Sonderforschungsbereich 178 "Internationalisierung der Wirtschaft", Universität Konstanz 40
In a general equilibrium model, international lending through a non-sovereign financial intermediary (a banking system) to a sovereign borrower is analyzed. Under very pessimistic assumptions, including a principal-agency type of incentive to load future intermediation with certain bancrupcy for the sake of present sovereign debt servicing, sustainable international lending that avoids both, repudiation and bancrupcy is determined. There is a plethora of roll-over and net-transfer steady-states. Compared to financial autarky, steady-state lending is capital depriving. Nevertheless, lending may be welfare improving in the creditor country and the world as a whole.