Sovereign Debt in the 21st Century: Looking Backward, Looking Forward

65 Pages Posted: 26 Mar 2021

See all articles by Kris James Mitchener

Kris James Mitchener

Santa Clara University - Leavey School of Business - Economics Department; National Bureau of Economic Research (NBER); CEPR

Christoph Trebesch

Kiel Institute for the World Economy; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: 2021

Abstract

How will sovereign debt markets evolve in the 21st 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) roll-over 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.

JEL Classification: F300, F340, G120, G150, N100, N200

Suggested Citation

Mitchener, Kris James and Trebesch, Christoph, Sovereign Debt in the 21st Century: Looking Backward, Looking Forward (2021). CESifo Working Paper No. 8959, Available at SSRN: https://ssrn.com/abstract=3812076

Kris James Mitchener (Contact Author)

Santa Clara University - Leavey School of Business - Economics Department ( email )

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National Bureau of Economic Research (NBER)

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CEPR ( email )

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Christoph Trebesch

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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