Working Paper: CEPR ID: DP272
Authors: Barry Eichengreen; Richard Portes
Abstract: We scrutinize two strands of received wisdom about debt crises: that which draws a strong contrast between the 1930s and 1980s in extent of default and ease of settlement, and that which attributes the difference to greater government involvement today. Rather than a sharp, dichotomous variable, default in the 1930s was often partial and intermittent. Neither was settlement achieved in a way that readily permitted countries to put the debt crisis behind them. And creditor-country governments were often intimately involved in the process of debt negotiation. We consider a number of additional factors influencing the ease of settlement: (i) institutional features of the lending process; (ii) institutional features of the settlement process; (iii) the role of national divisions within the creditor community; (iv) the influence of global commodity- and credit-market conditions over the process of settlement.
Keywords: international debt; sovereign borrowing; default
JEL Codes: 040; 433; 441
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Government involvement in the 1980s (E65) | Ease of settlement during debt crises (F34) |
| Government involvement in the 1930s (E65) | Ease of settlement during debt crises (F34) |
| Institutional features of lending and settlement processes (G21) | Ease of settlement in the 1930s (N92) |
| Macroeconomic environment (E66) | Resolution of debt crises in the 1940s and 1950s (F34) |