Analyses of debt relief that focus on the behavior of debtors and existing creditors understate the incentives for collective action by creditors. It is well known that debt relief could benefit existing creditors by providing incentives for domestic investment by residents of debtor countries. It is argued here that relief could also make available additional profit opportunities to international investors. Under these circumstances, arrangements that would allow international investors to capture economic profits would make a leveraged buy-out of existing creditors, followed by relief, a profitable strategy for any investor or group of investors that could act collectively. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 30 (1989) Issue (Month): 1 (February) Pages: 71-75 Download reference. The following formats are available: HTML
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