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In the course of the global financial crisis, countries that did not experience a sovereign debt crisis for several decades suddenly faced increasing sovereign default risk spreads as investors started to doubt the sustainability of fiscal positions. Several European countries struggled to avoid a government default and Greece defaulted in 2012. The three chapters of this thesis analyze several important questions related to sovereign borrowing and sovereign default risk that have received much attention in the wake of the European sovereign debt crisis. Chapter 1 investigates whether the co-movement of the fiscal balance and the current account depends on the indebtedness of the government. The first part of the analysis presents the estimation of a dynamic panel threshold model for 15 European countries to quantify the influence of the level of government debt on the relationship between the fiscal balance and the current account. Below the estimated threshold of 72 percent government debt-to-GDP a significant, positive relationship between the fiscal balance and the current account is found. In contrast, above the threshold the partial correlation is insignificant with a point estimate around zero. The second part of the analysis provides a structural explanation for the empirical evidence based on a small open economy model allowing for the possibility of sovereign default. High government debt-to-GDP ratios raise non-linear sovereign default risk premia due to the increasing probability of government default and lead to a higher uncertainty about future taxes. Therefore, private saving increases while fiscal deficits are expanding, leading to a less pronounced current account deficit. In line with the empirical evidence, the model-based correlation of the fiscal balance and the current account declines by 0.15 when moving from a low government debt regime to a high government debt regime. Chapter 2 relates to the European sovereign debt crisis during which the International Monetary Fund (IMF) together with the European Stability Mechanism (ESM) and its predecessors provided financial assistance to countries facing financial distress. The chapter investigates within a quantitative model of sovereign default how the provision of financial assistance by a supranational agency like the IMF affects the debt level and the probability of a government default. The analysis shows that for given government debt levels the provision of financial assistance helps to reduce the number of defaults that are either due to runs by private investors or due to bad fundamentals. In equilibrium, the smaller default probability translates into lower sovereign risk spreads for given debt levels. The resulting lower borrowing costs, however, induce the government to accumulate higher levels of debt and thus increase default incentives. Simulations reveal that overall the availability of financial assistance reduces the number of defaults that occur due to self-fulfilling runs by private investors. However, at the same time it raises average debt levels strongly and causes an overall increase of the probability of default. Chapter 3 studies how the option to devalue the currency to reduce the debt burden affects the average debt level and the default incentives of the government. While some governments borrow from foreign investors in foreign currency, many governments borrow from foreign investors primarily in domestic currency. Borrowing in domestic currency provides the government with the option to partially default on its debt by devaluing its currency. The option to devalue gives the government a higher degree of flexibility and might reduce the frequency of outright defaults. In contrast, pegging the exchange rate to a foreign currency deprives the government of the option to devalue its currency to reduce the real debt burden and might therefore increase the default probability. For the analysis a quantitative model of sovereign default and devaluation is considered. Simulations show that average debt is higher when the government cannot devalue. The elimination of devaluation risk leads to lower sovereign spreads at low government debt levels. Lower sovereign spreads induce the government to accumulate larger amounts of debt. The probability of a sovereign default and the average spread increase. This is due to both higher average debt levels and a lower flexibility when facing sovereign debt crisis as the option to devalue to lower the value of the debt burden is not existent anymore.

THESIS: The injunction by Hobbes to found a Leviathan is thoroughly consistent with the end of life specified by Hobbes, namely, the avoid ance of death. It is equally inconsistent with a theory of sovereignty, i.e., with a theory which makes the state the source of obligation. Hobbes believed, however, that it would be dangerous to the security of lif e — that is, to the maintenance of the powerful state which was the great protector of life — if this position were stated openly. There fore he employed a private and a public language in the Leviathan. He shifted the definitions of his crucial concepts, though informing the careful reader he was doing so, in order to create the benign myth of legal sovereignty. From this, it also follows that man is not by nature asocial according to the theory of Hobbes and that consent does not provide a source of obligation.

The late Professor William A. Dunning is reported to have said of the recent political theories which attempt to replace the conception of state sovereignty by some pluralistic grouping of social forces, that they were "radically unintelligible." It is hard for political theorists who have been accustomed to regard the conception of sovereignty as a foundation stone and a sort of "rock of ages" for their faith to be told (as one is every day, more or less) that the anti-intellectualistic type of a sociological basis is the only valid one for juristic structure. For that, according to the old rationalistic conceptions of analytical jurisprudence, is indeed to base sovereignty upon shifting sands and to deprive law of any special significance of its own by equating it with social reactions of the most indeterminate character. But the anti-intellectualistic trend of modern political theory indignantly denies this charge. The assumption, it counters, that any legal center of reference can be final in its authority or in its right to command is an outworn Hegelianism, discredited by practice and theory alike. Law is too much a thing of fictions to be taken seriously in its claims, when it pretends to be giving an accurate description of facts in the abstract terms of a pretended right on the part of the state to be the sole author of enforceable commands and the only rightful claimant of men's ultimate loyalty.

AbstractSignificant academic and policy attention has focused on identifying the causes and consequences of the growth of traditional sovereign wealth funds (SWFs). This paper, in contrast, highlights a new type of sovereign investment vehicle – sovereign patents funds (SPFs) – that have emerged primarily in advanced industrialized economies, including France, South Korea and Japan. As defined here, SPFs are investment funds that seek to acquire intellectual property resources deemed strategically valuable in the pursuit of national economic objectives. This brief survey article considers the implications of SPFs in comparison to more traditional sovereign wealth funds. In doing so, it asks what emerging discourses on sovereign patent funds can learn from the sovereign wealth fund debate, and points to both similarities and important differences between these entities. While highlighting similarities between SPFs and traditional SWFs, the paper notes that patent funds are more explicitly political than their SWF counterparts. Following an overview of both SPFs and SWFs, the paper compares elements of the structure, behaviour, and response to these funds. Finally, while a full assessment of the activities and merits of SPFs lies beyond the scope of this article, the conclusion offers key lessons drawn from the SWF comparison.