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Crisis costs and debtor discipline: the efficacy of public policy in sovereign debt crises

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  • Prasanna Gai
  • Simon Hayes
  • Hyun Song Shin

Abstract

Recent debate on the reform of the international financial architecture has highlighted the potentially important role of the official sector in crisis management. We examine how such public intervention in sovereign debt crises affects efficiency, ex ante and ex post. Our results shed light on the scale of capital inflows in such a regime, and we establish conditions under which this leads to an improvement in debtor country welfare. The efficacy of measures such as officially sanctioned stays on creditor litigation depend critically on the quality of public sector surveillance and the size of the costs of sovereign debt crises.

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File URL: http://eprints.lse.ac.uk/25066/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 25066.

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Length: 29 pages
Date of creation: Aug 2001
Date of revision:
Handle: RePEc:ehl:lserod:25066

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  1. Miller, Marcus & Zhang, Lei, 1998. "Sovereign Liquidity Crises: the Strategic Case for a Payments Standstill," CEPR Discussion Papers 1820, C.E.P.R. Discussion Papers.
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  17. Michael P. Dooley & Sujata Verma, 2001. "Rescue Packages and Output Losses Following Crises," NBER Working Papers 8315, National Bureau of Economic Research, Inc.
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  20. Kletzer, Kenneth M, 1984. "Asymmetries of Information and LDC Borrowing with Sovereign Risk," Economic Journal, Royal Economic Society, vol. 94(374), pages 287-307, June.
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Cited by:
  1. Prasanna Gai & Hyun Song Shin, 2003. "Debt maturity structure with pre-emptive creditors," Bank of England working papers 201, Bank of England.
  2. Tillmann, Peter, 2005. "Private sector involvement in the resolution of financial crises: How do markets react?," Journal of Development Economics, Elsevier, vol. 78(1), pages 114-132, October.
  3. Enderlein, Henrik & Trebesch, Christoph & von Daniels, Laura, 2012. "Sovereign debt disputes: A database on government coerciveness during debt crises," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 250-266.
  4. Aitor Erce-Domínguez, 2006. "Using standstills to manage sovereign debt crises," Banco de Espa�a Working Papers 0636, Banco de Espa�a.
  5. Prasanna Gai & Nicholas Vause, 2003. "Sovereign debt workouts with the IMF as delegated monitor - a common agency approach," Bank of England working papers 187, Bank of England.
  6. Miller, Marcus & Thomas, Dania, 2006. "Sovereign debt restructuring : the Judge, the vultures and creditor rights," The Warwick Economics Research Paper Series (TWERPS) 757, University of Warwick, Department of Economics.
  7. Sayantan Ghosal & Kannika Thampanishvong, 2007. "Does Strengthening Collective Action Clauses (CACs) Help?," CDMA Working Paper Series 200711, Centre for Dynamic Macroeconomic Analysis, revised 15 Oct 2007.
  8. Nancy P. Marion & Robert P. Flood, 2006. "Getting Shut Out of the International Capital Markets," IMF Working Papers 06/144, International Monetary Fund.
  9. Goderis, Benedikt & Wagner, Wolf, 2009. "Credit Derivatives and Sovereign Debt Crises," MPRA Paper 17314, University Library of Munich, Germany.
  10. Se-Jik Kim, 2004. "Timing of International Bailouts," IMF Working Papers 04/9, International Monetary Fund.
  11. Benjamin Martin & Adrian Penalver, 2003. "The effect of payments standstills on yields and the maturity structure of international debt," Bank of England working papers 184, Bank of England.
  12. Weinschelbaum, Federico & Wynne, Jose, 2005. "Renegotiation, collective action clauses and sovereign debt markets," Journal of International Economics, Elsevier, vol. 67(1), pages 47-72, September.
  13. Aitor Erce, 2013. "Sovereign debt crises: could an international court minimize them?," Globalization and Monetary Policy Institute Working Paper 142, Federal Reserve Bank of Dallas.
  14. Prasanna Gai, 2008. "Discussion of 'Promoting Liquidity: Why and How?'," RBA Annual Conference Volume, in: Paul Bloxham & Christopher Kent (ed.), Lessons from the Financial Turmoil of 2007 and 2008 Reserve Bank of Australia.
  15. Adrian Penalver, 2004. "How can the IMF catalyse private capital flows? A model," Bank of England working papers 215, Bank of England.
  16. Christoph Trebesch, 2009. "The Cost of Aggressive Sovereign Debt Policies," IMF Working Papers 09/29, International Monetary Fund.

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