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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. Daude, Christian, 2012. "Sovereign default risk and volatility," Economics Letters, Elsevier, vol. 114(1), pages 47-50.
  2. Harris Dellas & Dirk Niepelt, 2013. "Credibility For Sale," Working Papers 13.05, Swiss National Bank, Study Center Gerzensee.
  3. Jorra, Markus, 2012. "The effect of IMF lending on the probability of sovereign debt crises," Journal of International Money and Finance, Elsevier, vol. 31(4), pages 709-725.
  4. Leonardo Martinez & Juan Carlos Hatchondo & Cesar Sosa Padilla, 2011. "Debt Dilution and Sovereign Default Risk," IMF Working Papers 11/70, International Monetary Fund.
  5. Bora Durdu & Emine Boz, 2011. "Emerging Market Business Cycles: The Role of Labor Market Frictions," 2011 Meeting Papers 1092, Society for Economic Dynamics.
  6. Falko Juessen & Andreas Schabert, 2013. "Fiscal Policy, Sovereign Default, and Bailouts," Working Paper Series in Economics 67, University of Cologne, Department of Economics.
  7. Leonardo Martinez & Juan Hatchondo & Javier Bianchi, 2012. "Sovereign defaults and optimal reserves management," 2012 Meeting Papers 1125, Society for Economic Dynamics.
  8. Eduardo Fernandez-Arias & Andrew Powell & Alessandro Rebucci, 2009. "The Multilateral Response to the Global Crisis: Rationale, Modalities, and Feasibility," Research Department Publications 4629, Inter-American Development Bank, Research Department.
  9. Juan Carlos Hatchondo & Leonardo Martinez & Horacio Sapriza, 2009. "On the cyclicality of the interest rate in emerging economy models: solution methods matter," Working Paper 09-13, Federal Reserve Bank of Richmond.
  10. Florian Kirsch & Ronald Rühmkorf, 2013. "Sovereign Borrowing, Financial Assistance and Debt Repudiation," Bonn Econ Discussion Papers bgse01_2013, University of Bonn, Germany.

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