Acharya, Viral, Rajan, Raghuram.
Why do governments repay external borrowing? This column argues that myopic governments seeking popularity do not default when they are poor because they would lose access to debt markets and be forced to reduce spending. And they do not default when rich because of the adverse consequences to the domestic financial sector. This explains why governments continue servicing debt when default is beneficial for the country.
Πηγή: Voxeu