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Sovereign Debt and Financial Crises

The past two decades are characterized by a wave of global crises. The Covid health shock and the global financial crisis of 2008/2009, in particular, caused financial instability and a drastic increase in government borrowing worldwide. Debt levels are now approaching historical records in both advanced and developing countries. Against this backdrop, our research group studies questions on the vulnerability and sustainability of public debt, the resolution of debt crises, and the market pricing of sovereign bonds and loans. We also focus on the link between international capital flows and financial stability. In particular we address following questions:

  • How risky are sovereign bonds for private investors and the financial system? And what consequences do the creditors of public debt have to expect?
  • How can governments exit situations of debt overhang?
  • How can debt crises be prevented and/or resolved more effectively?
  • How do international borrowing affect financial stability in emerging and developing economies?