The political economy of sovereign debt

Kathryn Estelle McCollister, Florida International University


This dissertation examines international lending arrangements between a competitive foreign investor and a less-developed country. Given that the benefits and costs of borrowing are distributed unequally across society, it is of interest to examine the conditions under which borrowing occurs and how the borrowed funds are allocated. Three theoretical models are developed to consider optimal lending arrangements in the presence of sovereign risk. The models show how a society's level and distribution of wealth influences its access to loans and the terms of the loan agreements. Optimal loan contracts are established, which place either a debt ceiling or a debt floor on the amount of the loan that, will be offered.

Subject Area

Economic theory

Recommended Citation

McCollister, Kathryn Estelle, "The political economy of sovereign debt" (1999). ProQuest ETD Collection for FIU. AAI9936879.