Global debt crises averted by improving public information and reducing private noise.
The article explores how countries can face debt crises when trying to repay their debts. It uses models to show how investors decide whether to continue lending money to a country based on signals they receive. The research finds that having better public information can sometimes make things worse, and having lower debt in one country can push another country into crisis. Additionally, when investors receive more accurate signals about a country's financial health, the likelihood of a debt crisis decreases.