Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235329 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 8959
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
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.
Subjects: 
sovereign debt
eurozone debt crisis
bank-sovereign doom loops
bailouts
self-fulfilling crisis dynamics
official creditors
JEL: 
F30
F34
G12
G15
N10
N20
Document Type: 
Working Paper
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