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Resolution of Sovereign Debt Crises: The New Old Framework

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  • Portes, Richard

Abstract

The Paper sets out the principles that should underlie sovereign debt restructuring. It argues for a rules-based approach to achieve private sector involvement in restructuring. The rules must operate, however, in the context of an appropriate institutional framework with appropriate incentives. The markets cannot and will not create these institutions without some official intervention. The Paper discusses why intervention in the form of a Sovereign Debt Restructuring Mechanism has been shelved. It goes on to consider a new institutional framework, with a permanent bondholders’ committee and collective action clauses (CACs) in bond contracts. It stresses the need for uniformity in CACs. After interpreting the views of market participants on CACs, the Paper concludes with an argument for official intervention to make CACs universal.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4717.

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Date of creation: Oct 2004
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Handle: RePEc:cpr:ceprdp:4717

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Related research

Keywords: collective action clauses; financial crises; sovereign debt;

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Cited by:
  1. Häseler, Sönke, 2010. "Trustees versus fiscal agents and default risk in international sovereign bonds," MPRA Paper 35332, University Library of Munich, Germany.
  2. Marc Flandreau, 2013. "Collective Action Clauses before they had Airplanes: Bondholder Committees and the London Stock Exchange in the 19th Century (1827-1868)," IHEID Working Papers 01-2013, Economics Section, The Graduate Institute of International Studies.
  3. Rui Pedro Esteves, 2007. "Quis custodiet quem? Sovereign Debt and Bondholders` Protection Before 1914," Economics Series Working Papers 323, University of Oxford, Department of Economics.

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