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Multilateral Negotiations for Rescheduling Developing Country Debt: A Bargaining-Theoretic Framework

Author

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  • Jeremy Bulow

    (International Monetary Fund)

  • Kenneth Rogoff

    (International Monetary Fund)

Abstract

A dynamic bargaining-theoretic framework is used to analyze multilateral negotiations for rescheduling sovereign debt. The analysis illustrates how various factors, such as the debtor's gains from trade and the level of world interest rates, affect the relative bargaining power of various parties to a rescheduling agreement. If creditor-country taxpayers have a vested interest in maintaining normal levels of trade with debtor countries, then they can sometimes be bargained into making sidepayments. The benefits from unanticipated creditor-country sidepayments accrue to both lenders and borrowers. But the benefits from perfectly anticipated sidepayments accrue entirely to borrowers.

Suggested Citation

  • Jeremy Bulow & Kenneth Rogoff, 1988. "Multilateral Negotiations for Rescheduling Developing Country Debt: A Bargaining-Theoretic Framework," IMF Staff Papers, Palgrave Macmillan, vol. 35(4), pages 644-657, December.
    • Handle: RePEc:pal:imfstp:v:35:y:1988:i:4:p:644-657
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    Citations

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    Cited by:

    1. Bhattacharya, S., 1991. "Sovereign debt, creditor-country governments, and multilateral institutions," Discussion Paper 1991-62, Tilburg University, Center for Economic Research.
    2. Fernandez-Arias, Eduardo, 1991. "A dynamic bargaining model of sovereign debt," Policy Research Working Paper Series 778, The World Bank.
    3. Eaton, Jonathan & Fernandez, Raquel, 1995. "Sovereign debt," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 3, pages 2031-2077, Elsevier.
    4. Kenneth Rogoff, 2022. "Emerging Market Sovereign Debt in the Aftermath of the Pandemic," Journal of Economic Perspectives, American Economic Association, vol. 36(4), pages 147-166, Fall.
    5. Elard, Ilaf, 2020. "Three-player sovereign debt negotiations," International Economics, Elsevier, vol. 164(C), pages 217-240.
    6. Wasseem Mina & Jorge Martinez-Vazquez, 2002. "IMF Lending, Maturity of International Debt and Moral Hazard," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0301, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    7. Tirole, Jean, 2012. "Country Solidarity, Private Sector Involvement and the Contagion of Sovereign Crises," IDEI Working Papers 761, Institut d'Économie Industrielle (IDEI), Toulouse, revised Sep 2012.
    8. Helge Berger & Giovanni Dell’Ariccia & Maurice Obstfeld, 2019. "Revisiting the Economic Case for Fiscal Union in the Euro Area," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(3), pages 657-683, September.
    9. repec:fip:fedkrw:15-05 is not listed on IDEAS
    10. Troy Davig & Refet S. Gürkaynak, 2015. "Is Optimal Monetary Policy Always Optimal?," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 353-382, September.
    11. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 21-42, Fall.
    12. Rogoff, Kenneth, 2022. "Issues in the theory of sovereign debt and post-covid workouts," Journal of Policy Modeling, Elsevier, vol. 44(4), pages 804-811.
    13. Faini, Riccardo & Grilli, Enzo, 2004. "Who Runs the IFIs?," CEPR Discussion Papers 4666, C.E.P.R. Discussion Papers.
    14. Gelpern, Anna & Gulati, Mitu, 2013. "The wonder-clause," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 367-385.
    15. Jean Tirole, 2015. "Country Solidarity in Sovereign Crises," American Economic Review, American Economic Association, vol. 105(8), pages 2333-2363, August.
    16. Ethan Ilzetzki & Heidi Christina Thysen, 2024. "Fiscal Rules and Market Discipline," Discussion Papers 2409, Centre for Macroeconomics (CFM).
    17. Jeremy Bulow, 2002. "First World Governments and Third World Debt: A Bankruptcy Court for Sovereign Lending?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 229-256.

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