Thomas Jefferson on the repudiation of public debt |
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Authors: | Frank R Gunter |
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Institution: | (1) Department of Economics, Lehigh University, Bethlehem, Pennsylvania |
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Abstract: | Thomas Jefferson's theory of public debt repudiation illustrates both the normative and positive aspects of public debt repudiation.
Using Jefferson's model, this paper attempts to reveal several characteristics of public debt repudiation. First, that the
positive characteristics of repudiation can not be analyzed apart from the normative and institutional issues. Second, how
a debt repudiation rule might be incorporated into a country's constitution and, finally, how such a rule may lead to an improvement
of the country's credit terms over those that would exist otherwise. In other words, a country may be better off announcing
its standards for repudiation then if it denied any intention to repudiate under any conditions. A related issue, which is
beyond the scope of this paper, is the sufficient conditions for repudiation. Jefferson's model develops only the necessary
conditions.
I would like to thank J. Richard Aronson, Wayne Brough, Dean Crawshare, James Dearden, Kenneth Greene, Vince Munley, the anonymous
referees, and seminar participants at the 1990 Public Choice Society meetings and at Lehigh University for helpful comments
and suggestions. Of course, the author is responsible for any errors. The author is grateful to The Martindale Center for
the Study of Private Enterprise which supplied research support. |
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