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Author: Lauren Elizabeth Lee Ferry
Publisher:
ISBN:
Category :
Languages : en
Pages : 185
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Book Description
Throughout history, sovereigns have borrowed from banks, bondholders, other countries, and international institutions to fund their policy objectives. Without international laws to enforce the lending promise, many have puzzled over why lenders lend and why borrowers repay. However, few have asked what happens after default breaks the lending contract. How do borrowers and lenders negotiate a new contract? Who bears the distributive consequences of a broken commitment? I analyze the debt restructuring process as a bargaining game over the size of creditor concessions, or "haircuts," which vary from zero to reductions in payments above 80%. I argue that governments' political will to repay their foreign debt is private information for which the political leadership has incentives to misrepresent. Not only do governments have incentives to plead distress to lenders, they have reasons to hide their economic distress from voters who will punish the government for financial mismanagement. Governments that are unwilling to pay, however, can convey their "type" by publicly signaling their distress and invoking political punishment. I build on this political economy model to derive and test several hypotheses in four empirical chapters. Using both quantitative and qualitative evidence alongside original data on creditor characteristics, I find that public declarations of debt distress do indeed elicit higher creditor concessions, but only where the action is politically costly. I also offer an extension of the model to investigate how creditor heterogeneity effects governments' preferences for costly signaling. Disperse groups of creditors are more difficult to coordinate and governments are more willing to use costly signaling as the number of creditors increases. My findings provide important insights into debt restructuring specifically and the role of domestic politics in international negotiations generally. By introducing new variation to the processes and outcomes of debt restructuring, I lay new groundwork for analyzing how debt crises are resolved. I also demonstrate that leaders can strategically induce political costs born in equilibrium, in order to win concessions from their international negotiating partners. Leaders go public not because of appeals to transparency or democratic idealism, but because electoral constraints can be strategically leveraged to win favorable outcomes.
Author: Lauren Elizabeth Lee Ferry
Publisher:
ISBN:
Category :
Languages : en
Pages : 185
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Book Description
Throughout history, sovereigns have borrowed from banks, bondholders, other countries, and international institutions to fund their policy objectives. Without international laws to enforce the lending promise, many have puzzled over why lenders lend and why borrowers repay. However, few have asked what happens after default breaks the lending contract. How do borrowers and lenders negotiate a new contract? Who bears the distributive consequences of a broken commitment? I analyze the debt restructuring process as a bargaining game over the size of creditor concessions, or "haircuts," which vary from zero to reductions in payments above 80%. I argue that governments' political will to repay their foreign debt is private information for which the political leadership has incentives to misrepresent. Not only do governments have incentives to plead distress to lenders, they have reasons to hide their economic distress from voters who will punish the government for financial mismanagement. Governments that are unwilling to pay, however, can convey their "type" by publicly signaling their distress and invoking political punishment. I build on this political economy model to derive and test several hypotheses in four empirical chapters. Using both quantitative and qualitative evidence alongside original data on creditor characteristics, I find that public declarations of debt distress do indeed elicit higher creditor concessions, but only where the action is politically costly. I also offer an extension of the model to investigate how creditor heterogeneity effects governments' preferences for costly signaling. Disperse groups of creditors are more difficult to coordinate and governments are more willing to use costly signaling as the number of creditors increases. My findings provide important insights into debt restructuring specifically and the role of domestic politics in international negotiations generally. By introducing new variation to the processes and outcomes of debt restructuring, I lay new groundwork for analyzing how debt crises are resolved. I also demonstrate that leaders can strategically induce political costs born in equilibrium, in order to win concessions from their international negotiating partners. Leaders go public not because of appeals to transparency or democratic idealism, but because electoral constraints can be strategically leveraged to win favorable outcomes.
Author: Martin Guzman
Publisher: Columbia University Press
ISBN: 023154202X
Category : Business & Economics
Languages : en
Pages : 307
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Book Description
The current approach to resolving sovereign debt crises does not work: sovereign debt restructurings come too late and address too little. Though unresolved debt crises impose enormous costs on societies, many recent restructurings have not been deep enough to provide the conditions for economic recovery (as illustrated by the Greek debt restructuring of 2012). And if the debtor decides not to accept the terms demanded by the creditors, finalizing a restructuring can be slowed by legal challenges (as illustrated by the recent case of Argentina, deemed as "the trial of the century"). A fresh start for distressed debtors is a basic principle of a well-functioning market economy, yet there is no international bankruptcy framework for sovereign debts. While this problem is not new, the United Nations and the global community are now willing to do something about it. Providing guidance for those who intend to take up reform, this book assesses the relative merits of various debt-restructuring proposals, especially in relation to the main deficiencies of the current nonsystem. With contributions by leading academics and practitioners, Too Little, Too Late reflects the overwhelming consensus among specialists on the need to find workable solutions.
Author: Jerome E. Roos
Publisher: Princeton University Press
ISBN: 0691184933
Category : Business & Economics
Languages : en
Pages : 413
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Book Description
How creditors came to wield unprecedented power over heavily indebted countries—and the dangers this poses to democracy The European debt crisis has rekindled long-standing debates about the power of finance and the fraught relationship between capitalism and democracy in a globalized world. Why Not Default? unravels a striking puzzle at the heart of these debates—why, despite frequent crises and the immense costs of repayment, do so many heavily indebted countries continue to service their international debts? In this compelling and incisive book, Jerome Roos provides a sweeping investigation of the political economy of sovereign debt and international crisis management. He takes readers from the rise of public borrowing in the Italian city-states to the gunboat diplomacy of the imperialist era and the wave of sovereign defaults during the Great Depression. He vividly describes the debt crises of developing countries in the 1980s and 1990s and sheds new light on the recent turmoil inside the Eurozone—including the dramatic capitulation of Greece’s short-lived anti-austerity government to its European creditors in 2015. Drawing on in-depth case studies of contemporary debt crises in Mexico, Argentina, and Greece, Why Not Default? paints a disconcerting picture of the ascendancy of global finance. This important book shows how the profound transformation of the capitalist world economy over the past four decades has endowed private and official creditors with unprecedented structural power over heavily indebted borrowers, enabling them to impose painful austerity measures and enforce uninterrupted debt service during times of crisis—with devastating social consequences and far-reaching implications for democracy.
Author: Jerome E. Roos
Publisher: Princeton University Press
ISBN: 0691217432
Category : Business & Economics
Languages : en
Pages : 412
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Book Description
How creditors came to wield unprecedented power over heavily indebted countries—and the dangers this poses to democracy The European debt crisis has rekindled long-standing debates about the power of finance and the fraught relationship between capitalism and democracy in a globalized world. Why Not Default? unravels a striking puzzle at the heart of these debates—why, despite frequent crises and the immense costs of repayment, do so many heavily indebted countries continue to service their international debts? In this compelling and incisive book, Jerome Roos provides a sweeping investigation of the political economy of sovereign debt and international crisis management. He takes readers from the rise of public borrowing in the Italian city-states to the gunboat diplomacy of the imperialist era and the wave of sovereign defaults during the Great Depression. He vividly describes the debt crises of developing countries in the 1980s and 1990s and sheds new light on the recent turmoil inside the Eurozone—including the dramatic capitulation of Greece’s short-lived anti-austerity government to its European creditors in 2015. Drawing on in-depth case studies of contemporary debt crises in Mexico, Argentina, and Greece, Why Not Default? paints a disconcerting picture of the ascendancy of global finance. This important book shows how the profound transformation of the capitalist world economy over the past four decades has endowed private and official creditors with unprecedented structural power over heavily indebted borrowers, enabling them to impose painful austerity measures and enforce uninterrupted debt service during times of crisis—with devastating social consequences and far-reaching implications for democracy.
Author: Friedrich Heinemann
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Author: Vinod K. Aggarwal
Publisher: Chatham House (Formerly Riia)
ISBN:
Category : Business & Economics
Languages : en
Pages : 312
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Book Description
This work examines the ongoing debate on resolving sovereign debt defaults and alleviating the debt burden of heavily indebted poor countries. Concentrating primarily on the period from the 1982 and focusing on money owed to both the public and the private sector, the volume examines the origins of debt crises, rescheduling tactics, and efforts to create a more enduring solution to the problem of coping with debt, as well as its efficacy. Policy recommendations are put forward for dealing with the onerous problem of debt default and rescheduling.
Author: Mr.Udaibir S. Das
Publisher: International Monetary Fund
ISBN: 1475505531
Category : Business & Economics
Languages : en
Pages : 128
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Book Description
This paper provides a comprehensive survey of pertinent issues on sovereign debt restructurings, based on a newly constructed database. This is the first complete dataset of sovereign restructuring cases, covering the six decades from 1950–2010; it includes 186 debt exchanges with foreign banks and bondholders, and 447 bilateral debt agreements with the Paris Club. We present new stylized facts on the outcome and process of debt restructurings, including on the size of haircuts, creditor participation, and legal aspects. In addition, the paper summarizes the relevant empirical literature, analyzes recent restructuring episodes, and discusses ongoing debates on crisis resolution mechanisms, credit default swaps, and the role of collective action clauses.
Author: Mr.Thomas J Sargent
Publisher: International Monetary Fund
ISBN: 1513516868
Category : Business & Economics
Languages : en
Pages : 322
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Book Description
World War I created a set of forces that affected the political arrangements and economies of all the countries involved. This period in global economic history between World War I and II offers rich material for studying international monetary and sovereign debt policies. Debt and Entanglements between the Wars focuses on the experiences of the United States, United Kingdom, four countries in the British Commonwealth (Australia, New Zealand, Canada, Newfoundland), France, Italy, Germany, and Japan, offering unique insights into how political and economic interests influenced alliances, defaults, and the unwinding of debts. The narratives presented show how the absence of effective international collaboration and resolution mechanisms inflicted damage on the global economy, with disastrous consequences.
Author: Mr.Patrick Bolton
Publisher: International Monetary Fund
ISBN: 1451867565
Category : Business & Economics
Languages : en
Pages : 29
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Book Description
In an environment characterized by weak contractual enforcement, sovereign lenders can enhance the likelihood of repayment by making their claims more difficult to restructure ex post. We show however, that competition for repayment among lenders may result in a sovereign debt that is excessively difficult to restructure in equilibrium. This inefficiency may be alleviated by a suitably designed bankruptcy regime that facilitates debt restructuring.
Author: Odette Lienau
Publisher: Harvard University Press
ISBN: 0674726405
Category : Business & Economics
Languages : en
Pages : 342
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Book Description
Conventional wisdom holds that all nations must repay debt. Regardless of the legitimacy of the regime that signs the contract, a country that fails to honor its obligations damages its reputation. Yet should today's South Africa be responsible for apartheid-era debt? Is it reasonable to tether postwar Iraq with Saddam Hussein's excesses? Rethinking Sovereign Debt is a probing analysis of how sovereign debt continuity--the rule that nations should repay loans even after a major regime change, or else expect consequences--became dominant. Odette Lienau contends that the practice is not essential for functioning capital markets, and demonstrates its reliance on absolutist ideas that have come under fire over the last century. Lienau traces debt continuity from World War I to the present, emphasizing the role of government officials, the World Bank, and private markets in shaping our existing framework. Challenging previous accounts, she argues that Soviet Russia's repudiation of Tsarist debt and Great Britain's 1923 arbitration with Costa Rica hint at the feasibility of selective debt cancellation. Rethinking Sovereign Debt calls on scholars and policymakers to recognize political choice and historical precedent in sovereign debt and reputation, in order to move beyond an impasse when a government is overthrown.
