Forty Years of Leverage: What Have We Learned about Sovereign Debt?
American Economic Review · 2014 · Volume 104 · Issue 5
Abstract
Financial crises frequently increase public sector borrowing and threaten some form of sovereign debt crisis. Until recently, high income countries were thought to have become less vulnerable to severe banking crises that have lasting negative effects on growth. Since 2007, crises and attempted reforms in the United States and Europe indicate that advanced countries remain acutely vulnerable. Best practice from developing country experience suggests that regulatory constraints on the financial sector should be strengthened, but this is hard to do in countries where finance has a great deal of political power and cultural prestige, and where leverage is already high.
Keywords
Business Fluctuations, Cycles, Financial Markets and the Macroeconomy, International Business Cycles, Financial Crises, Banks, Depository Institutions, Micro Finance Institutions, Mortgages, Financial Institutions and Services: Government Policy and Regulation, National Debt, Debt Management, Sovereign Debt
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