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Debt Buybacks, Debt Reduction, and Debt Rescheduling under Asymmetric Information

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Author Info
Fernandez-Ruiz, Jorge
Abstract

In the early nineties there was a significant recovery of many debt-ridden economies after the shift in debt policy implicit in the so-called Brady Plan. Yet, the use of scarce resources from debtor countries to buy back part of their debts remains a controversial feature of this Plan. We use a multiperiod model of debt overhang to show that, under asymmetric information, this transfer of resources emerges naturally as part of the shift from a strategy of debt rescheduling, to one of debt reduction.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 32 (2000)
Issue (Month): 1 (February)
Pages: 13-27
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Handle: RePEc:mcb:jmoncb:v:32:y:2000:i:1:p:13-27

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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  1. Joshua Aizenman & Jorge Fernández-Ruiz, 2006. "Signaling Credibility --- Choosing Optimal Debt and International Reserves," NBER Working Papers 12407, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Fernando Broner & Alberto Martin & Jaume Ventura, 2006. "Sovereign Risk and Secondary Markets," Economics Working Papers 998, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2009. [Downloadable!]
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This page was last updated on 2009-12-8.


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