Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128042
Authors: 
Celasun, Oya
Harms, Philipp
Year of Publication: 
2007
Series/Report no.: 
Working Paper, Study Center Gerzensee 07.04
Abstract: 
We argue that increased foreign borrowing by the private sector reduces the risk that a developing country's government defaults on its foreign debt. We present a simple model in which private foreign borrowing reflects a surge of private entrepreneurship. A larger "entrepreneurial class" raises the political costs of default and reduces the government's incentive to deny repayment. The results of our empirical analysis support the model's key hypothesis.
Subjects: 
International Investment
Sovereign Risk
JEL: 
F34
O16
Document Type: 
Working Paper

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