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The wonder-clause

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  • Gelpern, Anna
  • Gulati, Mitu
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    Abstract

    The Greek debt crisis prompted EU officials to embark on a radical reconstruction of the European sovereign debt markets. Prominently featured in this reconstruction was a set of contract provisions called Collective Action Clauses, or CACs. CACs are supposed to help governments and private creditors to renegotiate unsustainable debt contracts, and obviate the need for EU bailouts. But European sovereign debt contacts were already amenable to restructuring; adding CACs could make it harder. Why, then, promote CACs at all, and cast them in such a central role in the market reform initiative? Using interviews with participants in the initiative and those affected by it, as well as observations at policy and academic meetings, we attempt to shed light on the puzzle and draw implications for the role of contract techniques in market construction.

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    Bibliographic Info

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

    Volume (Year): 41 (2013)
    Issue (Month): 2 ()
    Pages: 367-385

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    Handle: RePEc:eee:jcecon:v:41:y:2013:i:2:p:367-385

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    Web page: http://www.elsevier.com/locate/inca/622864

    Related research

    Keywords: Legal theory of finance; Eurozone; Sovereign debt; Collective action clauses;

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    References

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    1. Jeremy Bulow & Kenneth Rogoff, 1988. "Multilateral Negotiations for Rescheduling Developing Country Debt: A Bargaining-Theoretic Framework," IMF Staff Papers, Palgrave Macmillan, Palgrave Macmillan, vol. 35(4), pages 644-657, December.
    2. Jürgen von Hagen & Jean Pisani-Ferry & André Sapir & Francois Gianviti & Anne O. Krueger, . "A European mechanism for sovereign debt crisis resolution: a proposal," Blueprints, Bruegel, Bruegel, number 446, December.
    3. Jeromin Zettelmeyer & Marcos Chamon & Ran Bi, 2011. "The Problem that Wasn't," IMF Working Papers, International Monetary Fund 11/265, International Monetary Fund.
    4. Ugo Panizza & Federico Sturzenegger & Jeromin Zettelmeyer, 2009. "The Economics and Law of Sovereign Debt and Default," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 47(3), pages 651-98, September.
    5. Roubini, Nouriel & Brad Setser, 2004. "Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 378, July.
    6. Becker, Torbjorn & Richards, Anthony & Thaicharoen, Yunyong, 2003. "Bond restructuring and moral hazard: are collective action clauses costly?," Journal of International Economics, Elsevier, Elsevier, vol. 61(1), pages 127-161, October.
    7. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, Princeton University Press, edition 1, volume 1, number 8973.
    8. Eric Helleiner, 2009. "The Contemporary Reform of Global Financial Governance: Implications of and Lessons from the Past," G-24 Discussion Papers, United Nations Conference on Trade and Development 55, United Nations Conference on Trade and Development.
    9. Federico Sturzenegger & Jeromin Zettelmeyer, 2007. "Debt Defaults and Lessons from a Decade of Crises," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262195534, December.
    10. Barry Eichengreen & Ashoka Mody, 2004. "Do Collective Action Clauses Raise Borrowing Costs?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(495), pages 247-264, 04.
    11. Barry Eichengreen, 2003. "Restructuring Sovereign Debt," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 17(4), pages 75-98, Fall.
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    Cited by:
    1. Pistor, Katharina, 2013. "Law in Finance," Journal of Comparative Economics, Elsevier, Elsevier, vol. 41(2), pages 311-314.
    2. Pistor, Katharina, 2013. "A legal theory of finance," Journal of Comparative Economics, Elsevier, Elsevier, vol. 41(2), pages 315-330.
    3. Bradley, Michael & De Lira Salvatierra, Irving & Gulati, Mitu, 2014. "Lawyers: Gatekeepers of the sovereign debt market?," International Review of Law and Economics, Elsevier, Elsevier, vol. 38(S), pages 150-168.

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