Citation

Discussion Paper Details

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Title: Debt and Default in the 1930s: Causes and Consequences

Author(s): Barry Eichengreen and Richard Portes

Publication Date: October 1985

Keyword(s): 1930s, Debt, Default and Sovereign Borrowing

Programme Area(s): International Macroeconomics

Abstract: This paper analyzes the 'debt crisis' of the 1930s to see what light this historical experience sheds on recent difficulties in international capital markets. We first consider patterns of overseas lending and borrowing in the 1920s and 1930s, comparing the performance of standard models of foreign borrowing in this period to the 1970s-80s. Next, we analyze the incidence and extent of default on sovereign debt, adapting models of debt capacity to the circumstances of the interwar years. We consider the choices available to investors in those foreign loans which lapsed into default in the 1930s, emphasizing the distinction between creditor banks and bondholders. Finally, we provide the first estimates of the realized rate of return on foreign loans floated between the wars, based on a sample of dollar and sterling bonds issued in the 1920s.

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Bibliographic Reference

Eichengreen, B and Portes, R. 1985. 'Debt and Default in the 1930s: Causes and Consequences'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=75