Seminar: Topics in Sovereign Debt (F)

Course content

Why do countries pay back sovereign debt? The question is a fundamental one in open economy macroeconomics. With rising global debt levels and increasingly frequent sovereign debt defaults, the topic is paramount in understanding the global economy.


The seminar allows students to obtain knowledge and gain experience with the analysis of sovereign debt.


Topics can include, but are not limited to:

  • The cost of sovereign debt defaults,
  • Domestic and external debt,
  • Financial crises,
  • Devaluations and implicit defaults,
  • Theoretical models of sovereign default,
  • Quantitative models of sovereign default,
  • Sovereign debt restructurings (haircuts, legal issues, negotiations, etc.),
  • Sanctions and enforceability,
  • Capital controls,
  • The asset class and its derivatives,
  • Investment returns of sovereign debt.


Within the topic of choice, students are expected to develop a specific research question, conduct an empirical analysis using suitable data, and discuss their findings in the context of existing literature. If the topic is related to models of sovereign debt or if the paper investigates sovereign debt empirically, students should implement models and methods in a programming language of their choice (MatLab, R, Python). Students can also replicate empirical results of journal articles and suggest alternatives or extensions.  


MSc programme in Economics

The course is a part of the financial line, signified by (F)


The seminar is primarily for students at the MSc of Economics.

Learning outcome

After completing the seminar, the student is expected to be able to fulfil the learning outcome specified in the Master curriculum and to be able to:


  • Identify, describe, and discuss core problems of sovereign debt in an international context.
  • Account the main technical tools used in a rigorous modelling of sovereign debt.
  • Understand the process of a sovereign debt default and restructuring.
  • Critically reflect upon the methods currently used and potential shortfalls.


  • Critically examine the relevant literature for the chosen topic of the seminar paper.
  • Find, use, and analyse relevant data for the purpose of answering the chosen research question.
  • Analyse and interpret theoretical models.
  • Present research in written and oral form, as well as engage in academic discussions on topics of sovereign debt.


  • Plan and carry out an independent research project.
  • Conduct an empirical analysis to answer the research question within sovereign debt.
  • Collaborate with peers.

At the seminar the student is trained independently to
- identify and clarify a problem,
- seek and select relevant literatur,
- write a academic paper,
- present and discuss own paper with the other students at the seminar.

The aim of the presentations is, that the student uses the presentation as an opportunity to practice oral skills and to receive feedback. The presentations is not a part of the exam and will not be assessed.

Mandatory activities in the seminar:
- Kick-off meeting
- Finding literatur and defining the project
- Writing process of the seminar paper
- Presentation of own project and paper
- Giving constructive feedback to another student´s paper
- Actively participating in discussions at the presentations and other meetings.

There is no weekly teaching/lecturing and the student cannot expect guidance from the teacher. If the teacher gives a few introduction lectures or gives the opportunity for guidance, this as well as other expectations are clarified at the kickoff meeting.

It is strongly recommended that you think about and search for a topic before the semester begins, as there is only a few weeks from the kick-off meeting to the submission of the project description/ agreement paper.

The seminar project paper must be uploaded in Absalon before the presentations, as the opponents and the other seminar participants have to read and comment on the paper. It is important that you upload a paper that is so finalized as possible due to the fact that the value of feedback and comments at the presentation is strongly associated with the skill level of the seminar paper.

After the presentations, you can with a few corrections improve the seminar paper by including the feedback and comments emerged during the presentations. It is NOT intended that you rewrite or begin the writing of the full project AFTER the presentation has taken place.

Students are expected to find the relevant literature on their chosen topics. A suggested reading list is given below for the modelling of sovereign debt, restructuring sovereign debt, and historical aspects. Two texts are mandatory to give an overview of the topics of sovereign debt.

Mandatory reading:

Abbas, S. Ali, Alex Pienkowski, and Kenneth Rogoff, eds. 2019. Sovereign Debt: A Guide for Economists and Practitioners. Oxford: Oxford University Press.

Uribe, Martin, and Stephanie Schmitt-Grohé. 2017. Open Economy Macroeconomics. Princeton: Princeton University Press, chapter 13.

Sovereign debt models:

Aguiar, Mark, and Gita Gopinath. 2006. ‘Defaultable Debt, Interest Rates and the Current Account’. Journal of International Economics 69 (1): 64–83.

Andrade, Sandro C., and Vidhi Chhaochharia. 2018. ‘The Costs of Sovereign Default: Evidence from the Stock Market’. The Review of Financial Studies 31 (5): 1707–51.

Arellano, Cristina. 2008. ‘Default Risk and Income Fluctuations in Emerging Economies’. American Economic Review 98 (3): 690–712.

Bocola, Luigi, Gideon Bornstein, and Alessandro Dovis. 2019. ‘Quantitative Sovereign Default Models and the European Debt Crisis’. Journal of International Economics 118 (May): 20–30.

Bulow, Jeremy, and Kenneth Rogoff. 1989a. ‘A Constant Recontracting Model of Sovereign Debt’. Journal of Political Economy 97 (1): 155–78.
———. 1989b. ‘Sovereign Debt: Is to Forgive to Forget?’ American Economic Review 79 (1): 43–50.

Eaton, Jonathan, and Mark Gersovitz. 1981. ‘Debt with Potential Repudiation: Theoretical and Empirical Analysis’. The Review of Economic Studies 48 (2): 289–309.

Grossman, Herschel I., and John B. Van Huyck. 1988. ‘Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation, and Reputation’. American Economic Review 78 (5): 1088–97.

Mendoza, Enrique G., and Vivian Z. Yue. 2012. ‘A General Equilibrium Model of Sovereign Default and Business Cycles’. The Quarterly Journal of Economics 127 (2): 889–946.

Na, Seunghoon, Stephanie Schmitt-Grohé, Martín Uribe, and Vivian Yue. 2018. ‘The Twin Ds: Optimal Default and Devaluation’. American Economic Review 108 (7): 1773–1819.

Sosa-Padilla, César. 2018. ‘Sovereign Defaults and Banking Crises’. Journal of Monetary Economics 99 (November): 88–105.

Trebesch, Christoph, and Michael Zabel. 2017. ‘The Output Costs of Hard and Soft Sovereign Default’. European Economic Review 92 (February): 416–32.

Uribe, Martin. 2005. ‘A fiscal theory of sovereign risk’. Journal of Monetary Economics 53: 1857-75.

Sovereign debt restructurings and legal aspects:

Asonuma, Tamon, and Christoph Trebesch. 2016. ‘Sovereign Debt Restructurings: Preemptive or Post-Default’. Journal of the European Economic Association 14 (1): 175–214.

Buchheit, Lee, Mitu Gulati, and Robert Thompson. 2007. ‘The Dilemma of Odious Debts’. Duke Law Journal 56 (5): 1201–62.

Cheng, Gong, Javier Díaz-Cassou, and Aitor Erce. 2018. ‘Official Debt Restructurings and Development’. World Development 111 (November): 181–95.

Gelpern, Anna, G. Mitu Gulati, and Jeromin Zettelmeyer. 2019. ‘If Boilerplate Could Talk’. Law & Social Inquiry 44 (3): 617-46.

Hinrichsen, Simon. 2021. ‘The Iraq debt restructuring’. Capital Markets Law Journal 16(1): 95-115.

Schumacher, Julian, Christoph Trebesch, and Henrik Enderlein. 2021. ‘Sovereign Defaults in Court’. Journal of International Economics 131 (July): 103388.

Sgard, Jérôme. 2016. ‘How the IMF Did It—Sovereign Debt Restructuring between 1970 and 1989’. Capital Markets Law Journal 11 (1): 103–25.

Sunder-Plassmann, Laura. 2018. ‘Writing off Sovereign Debt: Default and Recovery Rates over the Cycle’. Journal of International Money and Finance 81 (March): 221–41.

Historical aspects:

Andritzky, Jochen R., and Julian Schumacher. 2019. ‘Long-Term Returns in Distressed Sovereign Bond Markets: How Did Investors Fare?’ IMF Working Paper 19/138.

Cruces, Juan J., and Christoph Trebesch. 2013. ‘Sovereign Defaults: The Price of Haircuts’. American Economic Journal: Macroeconomics 5 (3): 85–117.

Flandreau, Marc, and Juan H. Flores. 2012. ‘Bondholders versus Bond-Sellers? Investment Banks and Conditionality Lending in the London Market for Foreign Government Debt, 1815–1913’. European Review of Economic History 16 (4): 356–83.

Lienau, Odette. 2014. Rethinking Sovereign Debt: Politics, Reputation, and Legitimacy in Modern Finance. Harvard: Harvard University Press.

Meyer, Josefin, Carmen M. Reinhart, and Christoph Trebesch. 2019. ‘Sovereign Bonds since Waterloo’. NBER Working Paper 25543.

Mitchener, Kris J., and Marc D. Weidenmier. 2010. ‘Supersanctions and Sovereign Debt Repayment’. Journal of International Money and Finance 29 (1): 19–36.

Mitchener, Kris J., and Christoph Trebesch. 2021. ’Sovereign Debt in the 21st Century: Looking Backward, Looking Forward‘. Journal of Economic Literature (forthcoming).

Reinhart, Carmen M., and Kenneth Rogoff. 2011. ‘The Forgotten History of Domestic Debt’. The Economic Journal 121 (552): 319–50.

Roos, Jerome. 2019. Why Not Default? The Political Economy of Sovereign Debt. Princeton: Princeton University Press.

Shea, Patrick E., and Paul Poast. 2018. ‘War and Default’. Journal of Conflict Resolution 62 (9): 1876–1904.

Weidenmier, Marc D. 2005. ‘Gunboats, Reputation, and Sovereign Repayment: Lessons from the Southern Confederacy’. Journal of International Economics 66 (2): 407–22.

It is recommended that students are familiar with basic models of open economy macroeconomics, as well as have some knowledge of fixed income markets.

BSc in Economics or similar

Schedule Fall 2021:

- Kick-off meeting:
Tuesday September 7th, 8.15-10.00.

- Extra meetings / introductory teaching / guidance:
Three one-hour introductory teaching seminars, which will cover models (seminar 1), restructurings (seminar 2) and the history of sovereign debt (seminar 3). Expected to be after 17.00 between the kick-off meeting and project description deadline.

- Deadline for submission of commitment paper / project description:
1 October at 10am.

- Deadline for uploading a seminar assignment paper in Absalon:
One week before the presentations.

- Presentations:
Week 46 (15-19 November), details to be agreed on at the kick-off meeting.

- Exam date:
1 December at 10.00 (am) - latest uploading of Seminar paper to the Digital Exam portal for assessment.

All information regarding the seminar is communicated through Absalon including venue. So it is very important that you by yourself logon to Absalon and read the information already when you are registered at the seminar.

Continuous feedback during the course of the semester
Feedback by final exam (In addition to the grade)
Peer feedback (Students give each other feedback)

I am happy to give feedback on email, zoom or in-person meetings, if it is needed.

7,5 ECTS
Type of assessment
Written examination
A seminar paper in English that meets the formal requirements for written papers stated in the curriculum of the Master programme and at KUNet for seminars.

All aids allowed

for the project paper.

The teacher defines the aids that must be used for the presentations.


Marking scale
7-point grading scale
Censorship form
External censorship
Criteria for exam assessment

Students are assessed on the extent to which they master the learning outcome for the seminar and can make use of the knowledge, skills and competencies listed in the learning outcomes in the Curriculum of the Master programme.


To receive the top grade, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material.

  • Category
  • Hours
  • Project work
  • 186
  • Seminar
  • 20
  • English
  • 206