Sovereign Debt in the Twenty-first Century
Journal of Economic Literature
vol. 61,
no. 2, June 2023
(pp. 565-623)
Abstract
How will sovereign debt markets evolve in the twenty-first century? We survey how the literature has responded to the eurozone debt crisis, placing "lessons learned" in historical perspective. The crisis featured: (i) the return of debt problems to advanced economies, (ii) a bank-sovereign "doom loop" and the propagation of sovereign risk to households and firms, (iii) rollover problems and self-fulfilling crisis dynamics, (iv) severe debt distress without outright sovereign defaults, (v) large-scale sovereign bailouts from abroad, and (vi) creditor threats to litigate and hold out in a debt restructuring. Many of these characteristics were already present in historical debt crises and are likely to remain relevant in the future. Looking forward, our survey points to a growing role of sovereign bank linkages, legal risks, domestic debt and default, and of official creditors, due to new lenders such as China as well as the increasing dominance of central banks in global debt markets. Questions of debt sustainability and default will remain acute in both developing and advanced economies.Citation
Mitchener, Kris James, and Christoph Trebesch. 2023. "Sovereign Debt in the Twenty-first Century." Journal of Economic Literature, 61 (2): 565-623. DOI: 10.1257/jel.20211362Additional Materials
JEL Classification
- E58 Central Banks and Their Policies
- F33 International Monetary Arrangements and Institutions
- F34 International Lending and Debt Problems
- G01 Financial Crises
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- H63 National Debt; Debt Management; Sovereign Debt
- N20 Economic History: Financial Markets and Institutions: General, International, or Comparative