A theory of war finance

Grossman, Herschel I.; Han, Taejoon

doi:10.1080/10430719308404746

Cited by 14 publications

(6 citation statements)

References 2 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…It reflected the recognition by decision makers that the maintenance of debt-service payments, even when difficult, could deliver lower borrowing costs in normal times and aid with the mobilization of resources in the military and economic crises not infrequently faced by 18 th and 19 th century governments. Not least it reflected good deep and long as the Great Depression of the 1930s (Grossman and Han 1993). Governments following this path found themselves able to issue debt at favorable interest rates, long maturities, and in their own currencies (Bordo, Meissner and Redish 2003).…”

Section: Discussionmentioning

confidence: 91%

Public Debt Through the Ages

Eichengreen¹,

El-Ganainy²,

Esteves³

et al. 2019

View full text Add to dashboard Cite

show abstract

Section: Discussionmentioning

confidence: 91%

Public Debt Through the Ages

Eichengreen¹,

El-Ganainy²,

Esteves³

et al. 2019

View full text Add to dashboard Cite

show abstract

“…It reflected the recognition by decision makers that the maintenance of debt-service payments, even when difficult, could deliver lower borrowing costs in normal times and aid with the mobilization of resources in the military and economic crises not infrequently faced by 18 th and 19 th century governments. Not least it reflected good luckthat Great Britain was not confronted with an equally costly war between 1815 and 1914 or the United States between 1865 and 1917, and that there was no economic slump as deep and long as the Great Depression of the 1930s (Grossman and Han 1993). Governments following this path found themselves able to issue debt at favorable interest rates, long maturities, and in their own currencies (Bordo, Meissner and Redish 2003).…”

Section: Discussionmentioning

confidence: 99%

Public Debt Through the Ages

Eichengreen¹,

El-Ganainy²,

Esteves³

et al. 2019

IMF Working Papers

View full text Add to dashboard Cite

We consider public debt from a long-term historical perspective, showing how the purposes for which governments borrow have evolved over time. Periods when debt-to-GDP ratios rose explosively as a result of wars, depressions and financial crises also have a long history. Many of these episodes resulted in debt-management problems resolved through debasements and restructurings. Less widely appreciated are successful debt consolidation episodes, instances in which governments inheriting heavy debts ran primary surpluses for long periods in order to reduce those burdens to sustainable levels. We analyze the economic and political circumstances that made these successful debt consolidation episodes possible.

show abstract

“…The bankers acted in line with the arguments of Grossman and Han, according to whom creditors decide how to lend to belligerent governments depending on the prospect of victory. 69 Speyers continued to fund its client in the hope that it would not default, a situation similar to that explored by Slantchev. 70 These contrasting results reflect the fact that Mexico was more critical to the small and internationalized Speyers than to Paribas, one of France's major banks.…”

Section: VImentioning

confidence: 96%

Loans of the revolution: how Mexico borrowed as the state collapsed in 1912–13

Weller¹

2018

The Economic History Review

View full text Add to dashboard Cite

This article assesses why the French and US banks Paribas and Speyers underwrote a series of loans to revolutionary Mexico in 1912 and 1913, when the state was in the process of collapsing. This is a case of a war debt that failed to prevent the borrowing government from suspending payments and subsequently falling. Based on unpublished primary documents, the article shows that the 1913 loan involved a conflict of interest. The credit delayed a default and sustained the price of Mexican securities while Paribas, its main underwriter, was liquidating its Mexican portfolio. Evidence also suggests the existence of asymmetry of information. Paribas accessed pessimistic but accurate first‐hand information on Mexico, while the public read over‐optimistic press reports. Paribas forced the government to sell the bonds on the primary market at a price that was low, controlling for publicly available data. It subsequently sold the bonds at a margin on the secondary market. An additional reason for the lending is the Nacional railway, a state‐owned company that used a share of the funds to pay its debt. More exposed to Mexico than Paribas, the small and internationalized Speyers held the bad bonds it had underwritten.

show abstract

A theory of war finance

Cited by 14 publications

References 2 publications

Public Debt Through the Ages

Public Debt Through the Ages

Public Debt Through the Ages

Loans of the revolution: how Mexico borrowed as the state collapsed in 1912–13

Contact Info

Product

Resources

About