Advanced Search
MyIDEAS: Login to save this article or follow this journal

Do Collective Action Clauses Raise Borrowing Costs?

Contents:

Author Info

  • Barry Eichengreen
  • Ashoka Mody

Abstract

We compare launch spreads on emerging-market bonds subject to UK governing law, which typically include collective action clauses, with spreads on bonds subject to US law, which do not. Collective-action clauses reduce the cost of borrowing for more creditworthy issuers, who appear to benefit from the ability to avail themselves of an orderly restructuring process. Less creditworthy issuers, in contrast, pay higher spreads. It appears that for less creditworthy borrowers the advantages of orderly restructuring are offset by the moral hazard and default risk associated with the presence of renegotiation-friendly loan provisions. We draw out the implications for the debate over whether to encourage the wider utilisation of these provisions as part of the effort to strengthen the international financial architecture. Copyright 2004 Royal Economic Society.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=ecoj&volume=114&issue=495&year=2004&part=null
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 114 (2004)
Issue (Month): 495 (04)
Pages: 247-264

as in new window
Handle: RePEc:ecj:econjl:v:114:y:2004:i:495:p:247-264

Contact details of provider:
Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
Email:
Web page: http://www.res.org.uk/
More information through EDIRC

Order Information:
Web: http://www.blackwellpublishers.co.uk/asp/journal.asp?ref=0013-0133

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Olivier Jeanne, 2009. "Debt Maturity and the International Financial Architecture," American Economic Review, American Economic Association, vol. 99(5), pages 2135-48, December.
  2. Sayantan Ghosal & Kannika Thampanishvong, 2007. "Does Strengthening Collective Action Clauses (CACs) Help?," CDMA Working Paper Series 200711, Centre for Dynamic Macroeconomic Analysis, revised 15 Oct 2007.
  3. Christoph Trebesch & Michael G Papaioannou & Udaibir S. Das, 2012. "Sovereign Debt Restructurings 1950-2010," IMF Working Papers 12/203, International Monetary Fund.
  4. Barkbu, Bergljot & Eichengreen, Barry & Mody, Ashoka, 2012. "Financial crises and the multilateral response: What the historical record shows," Journal of International Economics, Elsevier, vol. 88(2), pages 422-435.
  5. Jong-Wha Lee & Kwanho Shin, 2005. "IMF Bailouts and Moral Hazard," International Finance 0501005, EconWPA.
  6. Diego Saravia, 2010. "Vulnerability, Crisis and Debt Maturity: do IMF Interventions Shorten the Length of Borrowing?," Working Papers Central Bank of Chile 600, Central Bank of Chile.
  7. Rohan Pitchford & Mark L. J. Wright, 2010. "Holdouts in Sovereign Debt Restructuring: A Theory of Negotiation in a Weak Contractual Environment," NBER Working Papers 16632, National Bureau of Economic Research, Inc.
  8. Bardozzetti, Alfredo & Dottori, Davide, 2014. "Collective action clauses: How do they affect sovereign bond yields?," Journal of International Economics, Elsevier, vol. 92(2), pages 286-303.
  9. Ashoka Mody, 2004. "What is An Emerging Market?," IMF Working Papers 04/177, International Monetary Fund.
  10. Marc Flandreau, Juan Flores, Norbert Gaillard, Sebastiā€”n Nieto-Parra, 2011. "The Changing Role of Global Financial Brands in the Underwriting of Foreign Government Debt (1815-2010)," IHEID Working Papers 15-2011, Economics Section, The Graduate Institute of International Studies, revised 05 Dec 2011.
  11. Gelpern, Anna & Gulati, Mitu, 2013. "The wonder-clause," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 367-385.
  12. Alfredo Bardozzetti & Davide Dottori, 2013. "Collective action clauses: how do they weigh on sovereigns?," Temi di discussione (Economic working papers) 897, Bank of Italy, Economic Research and International Relations Area.
  13. Stephen Quinn, 2008. "Securitization of Sovereign Debt: Corporations as a Sovereign Debt Restructuring Mechanism in Britain, 1694-1750," Working Papers 200701, Texas Christian University, Department of Economics.
  14. Daniel Leigh & Andrea Pescatori & Jaime Guajardo, 2011. "Expansionary Austerity New International Evidence," IMF Working Papers 11/158, International Monetary Fund.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:114:y:2004:i:495:p:247-264. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.