A Constant Recontracting Model Of Sovereign Debt

We present a dynamic model of international lending in which borrowers cannot commit to future repayments, and where debtors can sometimes successfully negotiate partial defaults, or "rescheduling agreements~. All parties in a debt rescheduling negotiation realize that today's rescheduling agreement may itself have to be ren-egotiated in the future. Our bargaining-theoretic approach allows us to handle the effects ~f uncertainty on sovereign debt contracts in a much more satisfactory way than in earlier analyses. The framework is readily extended to analyze the conflicting interests of different lenders, and of banks and creditor-country taxpayers