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Sovereign Debt and the 'Contracts Matter' Hypothesis

Oxford Handbook of Law and Economics, Forthcoming

UNC Legal Studies Research Paper No. 2511251

17 Pages Posted: 20 Oct 2014  

Mark C. Weidemaier

University of North Carolina School of Law

G. Mitu Gulati

Duke University School of Law

Date Written: October 16, 2014

Abstract

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

Weidemaier, Mark C. and Gulati, G. Mitu, Sovereign Debt and the 'Contracts Matter' Hypothesis (October 16, 2014). Oxford Handbook of Law and Economics, Forthcoming; UNC Legal Studies Research Paper No. 2511251. Available at SSRN: https://ssrn.com/abstract=2511251

Mark Weidemaier (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
919.843.4373 (Phone)

Gaurang Gulati

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

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