Sovereign Debt and the 'Contracts Matter' Hypothesis
Oxford Handbook of Law and Economics, Forthcoming
17 Pages Posted: 20 Oct 2014
Date Written: October 16, 2014
The academic literature on sovereign debt largely assumes that law has little role to play. Indeed, the primary question addressed by the literature is why sovereigns repay at all given the irrelevance of legal enforcement. But if law, and specifically contract law, does not matter, how to explain the fact that sovereign loans involve detailed contracts, expensive lawyers, and frequent litigation? This Essay makes the case that contract design matters even in a world where sovereign borrowers are hard (but not impossible) to sue. We identify a number of gaps in the research that warrant further investigation.
Keywords: sovereign debt, contracts
JEL Classification: F34
Suggested Citation: Suggested Citation