Replication files of "Soaring in Rationality"

This is the replication package for
Soaring in rationality: Bonds as a partial hedge against hyperinflation, to be published in the Explorations in Economic History. <br>Why do states repay their debts? This paper addresses this question by examining how the Nationalist government \red{partially} honored major domestic bonds traded in Shanghai\textemdash \textit{the Consolidated Bonds}\textemdash amid hyperinflation in post-World War II China. Three main findings emerge: (1) Bond prices surged exponentially between 1946 and 1948, surpassing traditional valuation benchmarks by tens of thousands of times, as a \red{partial} hedge against hyperinflation. (2) Price fluctuations were significantly driven by news indicating that the bonds might be redeemed at multiples of their face values following a prospective currency reform. \red{(3) The Government ultimately responded to public expectations by redeeming the bonds at nominally generous multipliers}, which aimed not only to sustain its bond issuance capacity but, more crucially, to preserve a currency system closely tied to its bond creditworthiness at relatively low fiscal cost. These findings suggest that a hybrid of the two principal theories of sovereign debt repayment best explains the experience of China’s Consolidated Bonds.