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Models of sovereign debt: Partial versus general reputations

Cole, HL; Kehoe, PJ; (1998) Models of sovereign debt: Partial versus general reputations. International Economic Review , 39 (1) pp. 55-70. 10.2307/2527230. Green open access

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Abstract

Some economists argue that as long as governments can earn the market rate of return by saving abroad, standard reputation models cannot support debt. We argue that these standard reputation models are partial in the sense that actions of agents in one arena affect reputation in that arena only. We develop a general model of reputation in which if a government is viewed as untrustworthy in one relationship, this government will be viewed as untrustworthy in other relationships. We show that our general model of reputation can support large amounts of debt.

Type: Article
Title: Models of sovereign debt: Partial versus general reputations
Open access status: An open access version is available from UCL Discovery
DOI: 10.2307/2527230
Publisher version: https://doi.org/10.2307/2527230
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
URI: https://discovery.ucl.ac.uk/id/eprint/10058353
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