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The interwar debt crisis and its aftermath (English)

This article analyzes the sovereign defaults of the 1930s and reports nine major findings : 1) there is little evidence that financial markets of the 1930s were unsophisticated; 2) debt default in the 1930s depended on a combination of factors, including the magnitude of external shock, the level of debt, and the economic policy response; 3) countries that interrupted service recovered more quickly from the Great Depression than did countries that resisted default; 4) little evidence exists that countries that defaulted in the 1930s later suffered inferior access to the capital market; 5) the readjustment of defaulted debts was protracted : the analogy with corporate bankruptcy proceedings is not applicable; 6) although default led in some cases to a substantial reduction of transfers from debtors to creditors, on balance returns on sovereign loans compared favorably with returns on domestic investments; 7) creditor governments in the 1930s did act to accelerate the settlement process; 8) global schemes analagous to the Baker plan were widely proposed but never implemented; and 9) debt buybacks played a useful role in the resolution of the crisis.


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    Eichengreen, Barry, Portes, Richard

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    Journal Article

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    The World Region,

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    The interwar debt crisis and its aftermath

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Eichengreen, Barry Portes, Richard

The interwar debt crisis and its aftermath (English). Washington, D.C. : World Bank Group.