If a country has a major financial (banking) crisis, empirically, in the 20th and 21st centuries, what happens to its sovereign (government) debt? Why?

Pretend you are a financial decision-maker in a neighboring state (perhaps you are a high official at an FI or in the government) and have the opportunity to buy the debt (in the form of sovereign bonds) of the country that is in crisis. Discuss why this might be attractive and also discuss the risks.

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There is the period of time in which many European countries have to face the destruction of several ... View the full answer