Sovereign-Debt Renegotiations: A Strtegic Analysis
AbstractThe process of debt-rescheduling between a creditor and a sovereign (LDC) debtor is modeled as a noncooperative game built on a one-sector growth model. The creditor's threat to impose default penalties is ignored here as inherently incredible; instead, the debtor's motivation for repayment is to reap benefits from attaining an improved credit standing in international capital markets. The creditor can forgive portions of the outstanding debt so that a real-time bargaining process results with concessions being in the form of debt-service payments by the debtor and debt forgiveness by the creditor. Subgame-perfect equilibria of the game are characterized the main finding is that these all result in Pareto optima in which the creditor extracts all the surplus.
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Bibliographic InfoPaper provided by Boston University - Center for Latin American Development Studies in its series Papers with number 85.
Length: 20 pages
Date of creation: 1988
Date of revision:
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Postal: U.S.A. BOSTON UNIVERSITY, CENTER FOR LATIN AMERICAN DEVELOPMENT STUDIES, 147 BAY STATE ROAD BOSTON MASSACHUSETTS 02215 U.S.A.
debt ; indebtedness ; game theory ; debt repayment;
Other versions of this item:
- Raquel Fernandez & Robert W. Rosenthal, 1988. "Sovereign-debt Renegotiations: A Strategic Analysis," NBER Working Papers 2597, National Bureau of Economic Research, Inc.
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.:
- Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Wiley Blackwell, vol. 48(2), pages 289-309, April.
- Jeffrey Sachs, 1983. "Theoretical Issues in International Borrowing," NBER Working Papers 1189, National Bureau of Economic Research, Inc.
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