Add to ORKGThis paper attempts to survey, and to put into perspective, recent literature that has analyzed the nature of credit relations between developed and developing countries. This analysis has made use of recent advances in the economics of information and strategic interaction. Traditional concepts of solvency and liquidity are of little help in understanding problems of sovereign debt. Creditors do not have the means to seize the assets of a borrower in default. Hence the borrower's net worth is not relevant in determining the amount of a loan that can be recovered. A borrower who is expected eventually to repay his debts should be able to borrow to meet any current debt-service obligations. A problem that is essential to a theory of int...