Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/221373
Authors: 
Pesendorfer, Wolfgang
Year of Publication: 
1992
Series/Report no.: 
Discussion Paper 1016
Abstract: 
In this note we show that even if after default a sovereign can make deposits on a Swiss bank account, the exclusion from future debt is sufficient to deter a patient country from default. In contrast to the work by Bulow and Rogoff (1989) we assume that there is a fixed set of standard assets on the world financial markets in which the country can trade. In this setting the exclusion from future borrowing may seriously limit a country's ability to smooth consumption. Therefore the traditional reputational logic can be applied.
Document Type: 
Working Paper

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