This project examines government debt, and reasons why governments repay their debts to foreigners. The hypothesis that governments may choose to repay their debts to protect their banking sector is explored by studying the link between sovereign defaults and the domestic financial system both theoretically and empirically.
Gennaioli, N.; Martin, A. Market Institutions, Government Agency and Capital Flows (IGC Policy Brief). International Growth Centre (IGC), London, UK (2011) 3 pp.