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

Journal Title: Journal of Banking and Financial Economics - Year 2015, Vol 2, Issue 4

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.

Authors and Affiliations

Carmen M. Reinhart, Kenneth S. Rogoff

Keywords

Related Articles

The Finance and Growth Nexus Re-Examined: Do All Countries Benefi t Equally?

A large theoretical and empirical literature has focused on the impact of fi nancial deepening on economic growth throughout the world. This paper contributes to the literature by investigating whether this impact differ...

Deep Roots of Fiscal Behavior

This paper investigates the determinants of fiscal policy behavior and its time-varying volatility, using panel data for a broad set of advanced and emerging market economies during the period 1990–2012. The empirical re...

Investigating Impact of US, Europe, Frontier and BRIC Stock Markets on Indian Financial Stress Index

The emerging markets are slowly opening up their respective fi nancial markets to foreign investments, thereby making the latter markets more sensitive to cross-market information transmissions. There are different trans...

Animal Spirits and Risk in Financial Markets

Keynes argues that a beauty contest in financial markets is a combination of rational higher-order beliefs and market psychology or animal spirits. We find that a stable equilibrium, where also market psychology is inclu...

The Effect of the Introduction of a “Pay Per Use“ Option within Motor TPL Insurance

In this paper the effects of the introduction of the so called “pay per use” -insurance products are examined. These products collect data of mileage of kilometers driven by policy holders. As a result of this data, poli...

Download PDF file
  • EP ID EP347723
  • DOI 10.7172/2353-6845.jbfe.2015.2.1
  • Views 84
  • Downloads 0

How To Cite

Carmen M. Reinhart, Kenneth S. Rogoff (2015). Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten. Journal of Banking and Financial Economics, 2(4), 5-17. https://europub.co.uk/articles/-A-347723