Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten

27 Pages Posted: 19 Nov 2013

See all articles by Carmen Reinhart

Carmen Reinhart

Harvard University, Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA) ; Harvard University - Harvard Kennedy School (HKS)

Kenneth Rogoff

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2013

Abstract

Even after one of the most severe multi-year crises on record in the advanced economies, the received wisdom in policy circles clings to the notion that high-income countries are completely different from their emerging market counterparts. The current phase of the official policy approach is predicated on the assumption that debt sustainability can be achieved through a mix of austerity, forbearance and growth. The claim is that advanced countries do not need to resort to the standard toolkit of emerging markets, including debt restructurings and conversions, higher inflation, capital controls and other forms of financial repression. As we document, this claim is at odds with the historical track record of most advanced economies, where debt restructuring or conversions, financial repression, and a tolerance for higher inflation, or a combination of these were an integral part of the resolution of significant past debt overhangs.

JEL Classification: E44, E6, F3, F34, G1, H6, N10

Suggested Citation

Reinhart, Carmen and Rogoff, Kenneth S., Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten (November 2013). CEPR Discussion Paper No. DP9750. Available at SSRN: https://ssrn.com/abstract=2356980

Carmen Reinhart (Contact Author)

Harvard University, Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA) ( email )

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Harvard University - Harvard Kennedy School (HKS) ( email )

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Kenneth S. Rogoff

Harvard University - Department of Economics ( email )

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617-495-7730 (Fax)

National Bureau of Economic Research (NBER)

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