The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Sovereign Debt

  • Kenneth M. Kletzer
Reference work entry


The liabilities of sovereign states are not directly enforceable, for example by court-imposed transfer of collateral. Sovereign borrowing must be sustained by the prospect that indirect sanctions follow default. The credibility of sanctions for default and the roles of third parties and reputations for motivating repayment are discussed. The interaction of sovereignty and externalities between creditors complicates the renegotiation of sovereign debt. The importance of the collective action problem for debt restructuring is reviewed.


Asymmetric commitment Asymmetric information Bankruptcy Bonds Collective action Commitment Consumption smoothing Debt restructuring Default Extensive-form games Free-rider problem Implicit contracts International capital flows International trade Moral hazard Permanent loan autarky Rationing Reputation Risk sharing Sanctions Sovereign debt Sovereign immunity Willingness to pay 

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Kenneth M. Kletzer
    • 1
  1. 1.