Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten

27 Pages Posted: 19 Nov 2013

See all articles by Carmen Reinhart

Carmen Reinhart

Harvard University - Center for Business and Government; Centre for Economic Policy Research (CEPR); World Bank; University of Maryland - School of Public Affairs; National Bureau of Economic Research (NBER); International Monetary Fund (IMF); Peterson Institute for International Economics; Harvard University, Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA) ; Harvard University - Harvard Kennedy School (HKS)

Kenneth Rogoff

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2013

Abstract

Even after one of the most severe multi-year crises on record in the advanced economies, the received wisdom in policy circles clings to the notion that high-income countries are completely different from their emerging market counterparts. The current phase of the official policy approach is predicated on the assumption that debt sustainability can be achieved through a mix of austerity, forbearance and growth. The claim is that advanced countries do not need to resort to the standard toolkit of emerging markets, including debt restructurings and conversions, higher inflation, capital controls and other forms of financial repression. As we document, this claim is at odds with the historical track record of most advanced economies, where debt restructuring or conversions, financial repression, and a tolerance for higher inflation, or a combination of these were an integral part of the resolution of significant past debt overhangs.

JEL Classification: E44, E6, F3, F34, G1, H6, N10

Suggested Citation

Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Rogoff, Kenneth S., Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten (November 2013). CEPR Discussion Paper No. DP9750, Available at SSRN: https://ssrn.com/abstract=2356980

Carmen Reinhart (Contact Author)

Harvard University - Center for Business and Government ( email )

John F. Kennedy School of Government
79 JFK Street
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

University of Maryland - School of Public Affairs ( email )

College Park, MD 20742-1815
United States
301-405-7006 (Phone)
301-403-8107 (Fax)

HOME PAGE: www.wam.umd.edu/~creinhar

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4793 (Phone)
202-623-7271 (Fax)

Harvard University, Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA) ( email )

79 JFK Street
Cambridge, MA 02138
United States
617-496-8643 (Phone)

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue NW
Washington, DC 20036
United States

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Kenneth S. Rogoff

Harvard University - Department of Economics ( email )

Littauer Center
Room 232
Cambridge, MA 02138
United States
617-495-4022 (Phone)
617-495-7730 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
7
Abstract Views
2,593
PlumX Metrics