Forty Years of Leverage: What Have We Learned about Sovereign Debt?
- (pp. 266-71)
Abstract
Financial crises frequently increase public sector borrowing and threaten some form of sovereign debt crisis. Until recently, high income countries were thought to have become less vulnerable to severe banking crises that have lasting negative effects on growth. Since 2007, crises and attempted reforms in the United States and Europe indicate that advanced countries remain acutely vulnerable. Best practice from developing country experience suggests that regulatory constraints on the financial sector should be strengthened, but this is hard to do in countries where finance has a great deal of political power and cultural prestige, and where leverage is already high.Citation
Boone, Peter, and Simon Johnson. 2014. "Forty Years of Leverage: What Have We Learned about Sovereign Debt?" American Economic Review, 104 (5): 266-71. DOI: 10.1257/aer.104.5.266Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- F44 International Business Cycles
- G01 Financial Crises
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G28 Financial Institutions and Services: Government Policy and Regulation
- H63 National Debt; Debt Management; Sovereign Debt