Debt and Default in the 1930s: Causes and Consequences

Barry J. Eichengreen, Richard Portes

NBER Working Paper No. 1772 (Also Reprint No. r0790)
Issued in December 1985
NBER Program(s):International Trade and Investment Program, International Finance and Macroeconomics Program

This paper analyzes the "debt crisis" of the 1930s to see what light this historical experience sheds on recent difficulties in international capital markets. We first consider patterns of overseas lending and borrowing in the 1920s and 1930s, comparing the performance of standard models of foreign borrowing in this period to the 1970-80s. Next, we analyze the incidence and extent of defaulton sovereign debt, adapting models of debt capacity to the circumstances of the interwar years. We consider the choices available to investors in those foreign loans which lapsed into default in the 1930s, emphasizing the distinction between creditor banks and bond holders. Finally, we provide the first estimates of the realized rate of return on foreign loans floated between the wars, based on a sample of dollar andsterling bonds issued in the 1920s.

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Document Object Identifier (DOI): 10.3386/w1772


  • Eichengreen, Barry and Richard Portes. "Debt and Default in the 1930s: Causes and Consequences," European Economic Review, Vol. 30, June 1986, pp. 599-640. citation courtesy of
  • Translated: "Deuda y suspensión de pagos en los años treinta" Barry Eichengreen, Richard Portes: Cuadernos económicos de ICE, No 43, 1989 , pages. 79-120
  • Reprinted in "International Debt," Bird, Giraham and P.N. Snowden, eds., Elsevier Science B.V. 1995
  • Reprinted in "The Disintigration of the World Economy Between the Wars," Thomas, Mark (ed.), Edward Elgar,1996.

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