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Sovereign default, private sector creditors, and the IFIs

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  • Boz, Emine

Abstract

The data reveal that emerging market sovereign borrowing from International Financial Institutions (IFIs) is small, intermittent and countercyclical compared to that from private sector creditors. The IFI loan contracts offered to sovereigns differ from the private ones in that they are more enforceable and have conditionality arrangements attached to them. Taking these contractual differences as given, this paper builds a quantitative model of a sovereign borrower and argues that better enforceability of IFI loan contracts is the main institutional feature that explains the size and cyclicality while conditionality accounts for the intermittency of borrowing from the IFIs.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 83 (2011)
Issue (Month): 1 (January)
Pages: 70-82

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Handle: RePEc:eee:inecon:v:83:y:2011:i:1:p:70-82

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Web page: http://www.elsevier.com/locate/inca/505552

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Keywords: Emerging markets Sovereign debt and default IFIs;

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References

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Citations

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Cited by:
  1. Juessen, Falko & Schabert, Andreas, 2013. "Fiscal Policy, Sovereign Default, and Bailouts," IZA Discussion Papers 7805, Institute for the Study of Labor (IZA).
  2. Leonardo Martinez & Cesar Sosa Padilla & Juan Hatchondo, 2012. "Debt dilution and sovereign default risk," 2012 Meeting Papers, Society for Economic Dynamics 974, Society for Economic Dynamics.
  3. Leonardo Martinez & Juan Hatchondo & Javier Bianchi, 2012. "Sovereign defaults and optimal reserves management," 2012 Meeting Papers, Society for Economic Dynamics 1125, Society for Economic Dynamics.
  4. Eduardo Fernández-Arias & Andrew Powell & Alessandro Rebucci, 2009. "The Multilateral Response to the Global Crisis: Rationale, Modalities, and Feasibility," IDB Publications 6770, Inter-American Development Bank.
  5. Juan Carlos Hatchondo & Leonardo Martinez & Horacio Sapriza, 2009. "On the cyclicality of the interest rate in emerging economy models: solution methods matter," Working Paper, Federal Reserve Bank of Richmond 09-13, Federal Reserve Bank of Richmond.
  6. Dirk Niepelt & Harris Dellas, 2013. "Credibility For Sale," 2013 Meeting Papers, Society for Economic Dynamics 12, Society for Economic Dynamics.
  7. Jorra, Markus, 2012. "The effect of IMF lending on the probability of sovereign debt crises," Journal of International Money and Finance, Elsevier, Elsevier, vol. 31(4), pages 709-725.
  8. Florian Kirsch & Ronald Rühmkorf, 2013. "Sovereign Borrowing, Financial Assistance and Debt Repudiation," Bonn Econ Discussion Papers, University of Bonn, Germany bgse01_2013, University of Bonn, Germany.
  9. Daude, Christian, 2012. "Sovereign default risk and volatility," Economics Letters, Elsevier, vol. 114(1), pages 47-50.
  10. Juan Carlos Hatchondo & Leonardo Martinez & Cesar Sosa-Padilla, 2014. "Debt Dilution and Sovereign Default Risk," Department of Economics Working Papers 2014-06, McMaster University.
  11. Bora Durdu & Emine Boz, 2011. "Emerging Market Business Cycles: The Role of Labor Market Frictions," 2011 Meeting Papers 1092, Society for Economic Dynamics.

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