TY  - JOUR
AU  - Grossman,Herschel I.
AU  - Han,Taejoon
TI  - Sovereign Debt and Consumption Smoothing
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5997
PY  - 1997
Y2  - April 1997
UR  - http://www.nber.org/papers/w5997
L1  - http://www.nber.org/papers/w5997.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

Taejoon Han
1913 Makiki St.
Honolulu, HI 96822
E-Mail: taejhan@gmail.com
AB  - This paper shows that whether or not a sovereign can borrow to smooth consumption depends both on how consumption smoothing is achieved, whether by contingent debt issuance or by contingent debt servicing, and on the exact nature of the penalty for debt repudiation.  If a sovereign that repudiated its debt could not borrow again, but could continue to save and to dissave, then contingent debt issuance, without contingent debt servicing, cannot support a positive amount of uncollateralized sovereign debt.  But, under this same specification of the penalty for repudiation, contingent debt servicing supports a positive amount of uncollateralized sovereign debt.
ER  -