TY  - JOUR
AU  - Cole,Harold L.
AU  - Kehoe,Patrick J.
TI  - Reputation Spillover Across Relationships with Enduring and Transient Beliefs: Reviving reputation Models of Debt
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5486
PY  - 1996
Y2  - March 1996
UR  - http://www.nber.org/papers/w5486
L1  - http://www.nber.org/papers/w5486.pdf
N1  - Author contact info:
Harold L. Cole
Economics Department
University of Pennsylvania
3718 Locust Walk
160 McNeil Building
Philadelphia, PA 19104
Tel: 215-898-7788
E-Mail: colehl@sas.upenn.edu

Patrick Kehoe
Research Department
Federal Reserve Bank of Minneapolis
90 Hennepin Avenue
Minneapolis, MN  55480-0291
Tel: 612/204-5525
Fax: 612/204-5515
E-Mail: pkehoe@res.mpls.frb.fed.us
AB  - A traditional explanation for why sovereign governments repay debts is that they want to keep good reputations so they can easily borrow more.  Bulow and Rogoff show that this argument is invalid under two conditions: (i) there is a single debt relationship, and (ii) regardless of their past actions, governments can earn the (possibly state-contingent) market rate of return by saving abroad. Bulow and Rogoff conjecture that, even under condition (ii), in more general reputation models with multiple relationships and spillover across them, reputation may support debt.  This paper shows what is needed for this conjecture to be true.
ER  -