American Economic Review Vol. 104 No. 5 2014

Forty Years of Leverage: What Have We Learned About Sovereign Debt?

Peter Boone¹; Simon Johnson²

¹ Centre for Economic Performance, London School of Economics, Houghton Street, London, WC2A 2AE (e-mail: ) · ² Sloan School of Management, MIT, 100 Main Street, Cambridge, MA 20142 (e-mail: )

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.

DOI

10.1257/aer.104.5.266

Volume

104

Issue

5

Pages

266-271

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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