2004), “A Gravity Model of Sovereign Lending: Trade

by Andrew K. Rose , Mark M. Spiegel

Venue:	Default and Credit,” International Monetary Fund Staff Papers 51 no. 4 (Special Issue
Citations:	13 - 0 self

Datum	Value	Source
TITLE	2004), “A Gravity Model of Sovereign Lending: Trade	INFERENCE
AUTHOR NAME	Andrew K. Rose	SVM HeaderParse 0.2
AUTHOR NAME	Mark M. Spiegel	SVM HeaderParse 0.2
ABSTRACT	One reason why countries service their external debts is the fear that default might lead to shrinkage of international trade. If so, then creditors should systematically lend more to countries with which they share closer trade links. We develop a simple theoretical model to capture this intuition, then test and corroborate this idea. [JEL F15, F33] While the age of gunboat diplomacy as a mechanism of credit enforcement has long passed, sovereign default is still an exceptional event. This stylized fact indicates that while the source of a sovereign default penalty is still controversial, sovereigns behave as if they consider default costly. Many models of sovereign debt in the literature (e.g., Bulow and Rogoff, 1989a, 1989b) introduce explicit default penalties to rationalize this fact. These sanctions are primarily considered to be methods of inhibiting trade. Bulow and Rogoff (1989a) discuss the difficulties countries would experience in their trade subsequent to default, including complications associated with avoiding seizure and the interruption of shortterm trade credit.	SVM HeaderParse 0.2
VENUE	Default and Credit,” International Monetary Fund Staff Papers 51 no. 4 (Special Issue	INFERENCE
VENUE TYPE	CONFERENCE	INFERENCE
PAGES	50--63	INFERENCE
CITATIONS	10 found	ParsCit 1.0