Sovereign debt workouts with the IMF as delegated monitor - a common agency approach

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Sovereign debt workouts with the IMF as delegated monitor - a common agency approach

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Prasanna Gai
Nicholas Vause

Abstract

IMF programmes are frequently criticised for lacking focus and being ineffective in helping maintain private credit lines following a debt crisis. A theoretical model is developed to explore the interlinkages between result-based conditionality and creditor collective action problems. The strategic interactions between official and private creditors are highlighted, and some of the trade-offs that underpin the design of IMF programmes are clarified. Conditions under which official creditors are able to limit the efficiency losses generated by creditor non-cooperation and debtor moral hazard are identified. The circumstances under which official lending is able to catalyse private sector finance are also analysed.

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Paper provided by Bank of England in its series Bank of England working papers with number 187.

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Handle: RePEc:boe:boeewp:187

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This paper has been announced in the following NEP Reports:

NEP-ALL-2003-06-25 (All new papers)
NEP-LAM-2003-06-25 (Central & South America)
NEP-MAC-2003-06-25 (Macroeconomics)
NEP-RMG-2003-06-25 (Risk Management)

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Other versions:
- Marcel Fafchamps, . "Sovereign Debt, Structural Adjustment and Conditionality," Working Papers 96015, Stanford University, Department of Economics. [Downloadable!]
Diwan, I. & Rodrik, D., 1992. "External Debt, Adjustment, and Burden Sharing: A Unified Framework," Princeton Studies in International Economics 73, International Economics Section, Departement of Economics Princeton University,.

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