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

December 24, 2013

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Carmen Reinhart, and Kenneth Rogoff. Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten, (USA: International Monetary Fund, 2013) accessed December 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Debt burden, Domestic debt, External debt, Financial crises, Public debt

Keywords: Central government debt, Country debt, Credit cycles, Crisis, Debt, Debt burden, Debt overhang episode, Debt overhang problem, Debt payment, Debt picture, Debt restructuring., Debt to the United States, Deleveraging, Domestic debt, Europe, Financial crises, Financial repression, Foreign currency, Global, Inflation crisis, Overhang episode, Reinhart, Sovereign debt crises, War debt, World War I debt, WP

Publication Details

Pages:

21
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/266
Stock No:

WPIEA2013266
ISBN:

9781475552874
ISSN:

1018-5941

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