This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

UDROP: A Small Contribution to the New International Financial Architecture

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Buiter, Willem H
Sibert, Anne

Additional information is available for the following registered author(s):

Abstract

The purpose of the UDROP proposal is to prevent debt rollover crises for foreign-currency-denominated debt instruments. For such liabilities, there is no international analogue to the domestic lender of last resort or to domestic deposit insurance. UDROP stands for Universal Debt Rollover Option with a Penalty. Our proposal is that all foreign currency loans should have a rollover option attached to them. The 'pure' version of the option would entitle the borrower to extend or roll-over his performing debt at maturity for a specified period. The pricing of the option would be left to the contracting parties. A number of variants on the basic version are also considered. These make the individual borrower's ability to exercise his option contingent on the prior declaration of a state of 'disorderly markets', by the national central bank, the International Monetary Fund or an indicator of 'disorderly markets'. All versions of the scheme have the property that no commitment of public money is required, either by national governments or by international agencies such as the IMF or the World Bank. The UDROP proposal is rule based and general: it is mandatory for all foreign-currency debt and automatic. That is, it is exercised at the discretion of the borrower. This stands in sharp contrast to the current practice of discretionary and politicised refinancing arrangements cobbled together in an ad-hoc manner on a case-by-case basis by the IMF. UDROP is market-oriented: the terms and conditions on any foreign-currency loan and associated roll-over option would be negotiated by the lenders and borrowers.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepr.org/pubs/dps/DP2138.asp
File Format: application/pdf
File Function:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2138.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: May 1999
Date of revision:
Handle: RePEc:cpr:ceprdp:2138

Contact details of provider:
Postal: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords: Contingent Credit Line; Disorderly Markets; Foreign Debt Rollover Option; Liquidity Crisis;

Other versions of this item:

Find related papers by JEL classification:
F31 - International Economics - - International Finance - - - Foreign Exchange
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
F34 - International Economics - - International Finance - - - International Lending and Debt Problems
G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Joshua Aizenman, 1998. "Capital Mobility in a Second Best World -- Moral Hazard With Costly Financial Intermediation," NBER Working Papers 6703, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Eaton, Jonathan, 1987. "Public Debt Guarantees and Private Capital Flight," World Bank Economic Review, Oxford University Press, vol. 1(3), pages 377-95, May.
    Other versions:
  3. Glick, Reuven & Rose, Andrew K, 1998. "Contagion and Trade: Why are Currency Crises Regional," CEPR Discussion Papers 1947, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "Paper Tigers? A Model of the Asian Crisis," NBER Working Papers 6783, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Summers, L-H & Cline, W-R & Eichengreen, B & Portes, R & Fraga, A & Goldstein, M, 1996. "From Halifax to Lyons : What Has Been Done About Crisis Management?," Princeton Studies in International Economics 200, International Economics Section, Departement of Economics Princeton University,.
    Other versions:
  6. Enrica Detragiache & Asli Demirgüç-Kunt, 1997. "The Determinants of Banking Crises - Evidence from Developing and Developed Countries," IMF Working Papers 97/106, International Monetary Fund.
  7. Corsetti, G. & Pesenti, P. & Roubini, N., 1998. "What Caused the Asian Currency and Financial Crisis?," Papers 343, Banca Italia - Servizio di Studi.
    Other versions:
  8. Roberto Chang & Andres Velasco, 1998. "Financial Fragility and the Exchange Rate Regime," NBER Working Papers 6469, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Ricardo J. Caballero & Arvind Krishnamurthy, 1998. "Emerging Market Crises: An Asset Markets Perspective," NBER Working Papers 6843, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Barry Eichengreen & Andrew K. Rose, 1998. "Staying Afloat When the Wind Shifts: External Factors and Emerging-Market Banking Crises," NBER Working Papers 6370, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Haizhou Huang & Chenggang Xu, 2001. "Financial Institutions, Contagious Risks, and Financial Crises," William Davidson Institute Working Papers Series 444, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  12. Ilan Goldfajn & Rodrigo O. Valdés, 1997. "Capital Flows and the Twin Crises : The Role of Liquidity," IMF Working Papers 97/87, International Monetary Fund.
  13. Reinhart, Carmen & Kaminsky, Graciela, 1998. "On crises, contagion, and confusion," MPRA Paper 13709, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  14. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Blackwell Publishing, vol. 51(3), pages 393-414, July. [Downloadable!] (restricted)
  15. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June. [Downloadable!] (restricted)
    Other versions:
  16. Besley, Timothy, 1994. "How Do Market Failures Justify Interventions in Rural Credit Markets?," World Bank Research Observer, Oxford University Press, vol. 9(1), pages 27-47, January.
    Other versions:
  17. Loisel, Olivier & Martin, Philippe, 1999. "Coordination, Cooperation, Contagion and Currency Crises," CEPR Discussion Papers 2075, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  18. Rudger Dornbusch & Ilan Goldfajn & Rodrigo O. Valdés, 1995. "Currency Crises and Collapses," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995-2), pages 219-294. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eichengreen, Barry & Ruehl, Christoph, 2000. "The Bail-In Problem: Systematic Goals, Ad Hoc Means," CEPR Discussion Papers 2427, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Patrick Bolton, 2003. "Toward a Statutory Approach to Sovereign Debt Restructuring: Lessons from Corporate Bankruptcy Practice around the World," IMF Working Papers 03/13, International Monetary Fund. [Downloadable!]
  3. Ricardo Hausmann & Eduardo Fernández-Arias, 2000. "Cómo hacerlo bien: qué reformar en los mercados financieros internacionales," RES Working Papers 4224, Inter-American Development Bank, Research Department. [Downloadable!]
  4. Prasanna Gai & Hyun Song Shin, . "Debt maturity structure with pre-emptive creditors," Bank of England working papers 201, Bank of England. [Downloadable!]
  5. Ricardo Hausmann & Eduardo Fernández-Arias, 2000. "Getting it Right: What to Reform in International Financial Markets," RES Working Papers 4223, Inter-American Development Bank, Research Department. [Downloadable!]
  6. Ricardo Hausmann & Eduardo Fernández-Arias, 2000. "¿Qué hay de malo con los mercados financieros internacionales?," RES Working Papers 4226, Inter-American Development Bank, Research Department. [Downloadable!]
  7. Luisa Lambertini, 2001. "Volatility and Sovereign Default," Boston College Working Papers in Economics 577, Boston College Department of Economics. [Downloadable!]
  8. Williamson, John, 2002. "Proposals for Curbing the Boom-Bust Cycle in the Supply of Capital to Emerging Markets," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  9. Ricardo Hausmann & Eduardo Fernández-Arias, 2000. "What's Wrong with International Financial Markets?," RES Working Papers 4225, Inter-American Development Bank, Research Department. [Downloadable!]
  10. Olivier Jeanne, 2004. "Debt Maturity and the International Financial Architecture," IMF Working Papers 04/137, International Monetary Fund. [Downloadable!]
  11. Eduardo Fernández-Arias & Ricardo Hausmann, 2000. "El rediseño de la arquitectura financiera internacional desde la perspectiva latinoamericana: ¿quién paga la cuenta?," RES Working Papers 4246, Inter-American Development Bank, Research Department. [Downloadable!]
  12. Kenneth Kletzer, 2003. "Sovereign Bond Restructuring: Collective Action Clauses and Official Crisis Intervention," IMF Working Papers 03/134, International Monetary Fund. [Downloadable!]
  13. Frankel, Jeffrey & Roubini, Nouriel, 2002. "The Role of Industrial Country Policies in Emerging Market Crises," Working Paper Series rwp02-002, Harvard University, John F. Kennedy School of Government. [Downloadable!]
    Other versions:
  14. Eduardo Fernández-Arias & Ricardo Hausmann, 2000. "The Redesign of the International Financial Architecture from a Latin American Perspective: Who Pays the Bill?," RES Working Papers 4245, Inter-American Development Bank, Research Department. [Downloadable!]
  15. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange Rates and Financial Fragility," NBER Working Papers 7418, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
Statistics
Access and download statistics

Did you know? You may want to explore EconPapers, which displays the same data as IDEAS in a different way.

This page was last updated on 2009-11-25.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.