TY  - JOUR
AU  - Grossman,Herschel I.
AU  - Huyck,John B. Van
TI  - Nominally Sovereign Debt, Risk Shifting, and Reputation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2259
PY  - 1994
Y2  - January 1994
UR  - http://www.nber.org/papers/w2259
L1  - http://www.nber.org/papers/w2259.pdf
N1  - Author contact info:
Herschel Grossman
Department of Economics
Box B
Brown University
Providence, RI  02912
Tel: 401/863-2606
Fax: 401/863-1970

John B.. Van Huyck
Department of Economics
Texas A&M University
College Station, TX  77843
E-Mail: john.vanhuyck@tamu.edu
AB  - This paper analyzes a reputational equilibrium in a model in which nominally denominated sovereign debt serves to shift risk associated with the unpredictability of tax revenues from the sovereign to its lenders. The analysis answers the following set of related questions: Why would a sovereign refrain from inflating when faced with servicing a large quantity of nominal debt? If a sovereign does not plan to use inflation to repudiate its nominal debts, why would it want to issue nominal debt in the first place? What are the distinguishing features of those sovereigns who are willing and able to issue nominal debts?
ER  -