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Has the Market Solved the Sovereign-Debt Crisis?

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  • Bowe, M.
  • Dean, J.W.
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    Abstract

    Since the beginning of the developing-country debt crisi in mid-1982, economists have puzzled iver its origins. Why did market forces not dater creditors from lending and debtors from borrowing so very much more than could, in retrospect, be repaid? Moreover, once the crisis was under way, why were market forces apparently unable to resolve it on their own? Why was nonmarket intervention employed? Was such intervention rational on ex ante theoretical grounds? Was it justifiable on ex post empirical grounds?

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    Bibliographic Info

    Paper provided by International Economics Section, Departement of Economics Princeton University, in its series Princeton Studies in International Economics with number 83.

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    Length: 70 pages
    Date of creation: 1997
    Date of revision:
    Handle: RePEc:fth:prinfi:83

    Contact details of provider:
    Postal: International Finance Section, Department of Economics Princeton University, Princeton, New Jersey, U.S.A
    Phone: (609) 258-4000
    Fax: (609) 258-6419
    Email:
    Web page: http://www.econ.princeton.edu/
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    Related research

    Keywords: EXTERNAL FINANCING ; DEBT ; MACROECONOMICS;

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    References

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    1. Borensztein, Eduardo, 1990. "Debt overhang, credit rationing and investment," Journal of Development Economics, Elsevier, vol. 32(2), pages 315-335, April.
    2. Michael Dooley & Mark R. Stone, 1992. "Endogenous Creditor Seniority and External Debt Values," NBER Working Papers 4172, National Bureau of Economic Research, Inc.
    3. Diwan, Ishac & Kletzer, Kenneth, 1992. "Voluntary Choices in Concerted Deals: The Menu Approach to Debt Reduction in Developing Countries," World Bank Economic Review, World Bank Group, vol. 6(1), pages 91-108, January.
    4. Paul R. Krugman, 1989. "Financing vs. Forgiving a Debt Overhang," NBER Working Papers 2486, National Bureau of Economic Research, Inc.
    5. Eaton, Jonathan, 1990. "Debt Relief and the International Enforcement of Loan Contracts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 43-56, Winter.
    6. Wells, Robin, 1993. "Tolerance of Arrearages: How IMF Loan Policy Can Effect Debt Reduction," American Economic Review, American Economic Association, vol. 83(3), pages 621-33, June.
    7. Michael P. Dooley & Richard D. Haas & Steven A. Symansky, 1992. "A Note on Burden Sharing Among Creditors," IMF Working Papers 92/21, International Monetary Fund.
    8. Cohen, Daniel, 1993. "Low Investment and Large LDC Debt in the 1980's," American Economic Review, American Economic Association, vol. 83(3), pages 437-49, June.
    9. Jeffrey Sachs & Harry Huizinga, 1987. "U.S. Commercial Banks and the Developing Country Debt Crisis," NBER Working Papers 2455, National Bureau of Economic Research, Inc.
    10. Kenneth A. Froot & David S. Scharfstein & Jeremy C. Stein, 1990. "LDC Debt: Forgiveness, Indexation, and Investment Incentives," NBER Working Papers 2541, National Bureau of Economic Research, Inc.
    11. Elhanan Helpman, 1990. "Voluntary Debt Reduction: Incentives and Welfare," NBER Working Papers 2692, National Bureau of Economic Research, Inc.
    12. Kenneth A. Froot, 1989. "Buybacks, Exit Bonds, and the Optimality of Debt and Liquidity Relief," NBER Working Papers 2675, National Bureau of Economic Research, Inc.
    13. Fernandez, Raquel & Ozler, Sule, 1991. "Debt concentration and secondary market prices," Policy Research Working Paper Series 570, The World Bank.
    14. Claessens, Stijn & Oks, Danel & van Wijnbergen, Sweder, 1994. "Interest Rates, Growth and External Debt: The Macroeconomic Impact of Mexico's Brady Deal," CEPR Discussion Papers 904, C.E.P.R. Discussion Papers.
    15. Jonathan Eaton, 1991. "Sovereign Debt: A Primer," Boston University - Institute for Economic Development 21, Boston University, Institute for Economic Development.
    16. Helpman, Elhanan, 1989. "The Simple Analytics of Debt-Equity Swaps," American Economic Review, American Economic Association, vol. 79(3), pages 440-51, June.
    17. Prokop, Jacek, 1995. "Organized debt buybacks: No cure for free riding?," Journal of Development Economics, Elsevier, vol. 47(2), pages 481-496, August.
    18. Sachs, Jeffrey D, 1990. "A Strategy for Efficient Debt Reduction," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 19-29, Winter.
    19. Boot, Arnoud W A & Kanatas, George, 1995. "Rescheduling of Sovereign Debt: Forgiveness, Precommitment, and New Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 363-77, May.
    20. Mark M. Spiegel, 1996. "Why is the Philippines repurchasing its Brady bonds?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue nov1.
    21. Jeremy Bulow & Kenneth Rogoff, 1988. "The Buyback Boondoggle," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 675-704.
    22. Boehmer, Ekkehart & Megginson, William L, 1990. " Determinants of Secondary Market Prices for Developing Country Syndicated Loans," Journal of Finance, American Finance Association, vol. 45(5), pages 1517-40, December.
    23. Diwan, Ishac & Spiegel, Mark M., 1994. "Are buybacks back? Menu-driven debt reduction schemes with heterogeneous creditors," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 279-293, October.
    24. Michael P. Dooley, 1988. "Self-Financed Buy-Backs and Asset Exchanges," IMF Staff Papers, Palgrave Macmillan, vol. 35(4), pages 714-722, December.
    25. Velasco, Andres & Larrain, Felipe, 1993. "The Basic Macroeconomics of Debt Swaps," Oxford Economic Papers, Oxford University Press, vol. 45(2), pages 207-28, April.
    26. Manmohan S. Kumar & Pablo Emilio Guidotti, 1991. "Domestic Public Debt of Externally Indebted Countries," IMF Occasional Papers 80, International Monetary Fund.
    27. Paul DiLeo & Eli M. Remolona, 1989. "Voluntary conversions of LDC debt," Research Paper 8903, Federal Reserve Bank of New York.
    28. Claessens, Stijn, 1990. "The debt laffer curve: Some estimates," World Development, Elsevier, vol. 18(12), pages 1671-1677, December.
    29. Sule Ozler & Dani Rodrik, 1992. "External Shocks, Politics and Private Investment: Some Theory and Empirical Evidence," NBER Working Papers 3960, National Bureau of Economic Research, Inc.
    30. Michael Bowe & James W. Dean, 1997. "Debt-equity swaps and the enforcement of sovereign loan contracts," Journal of International Development, John Wiley & Sons, Ltd., vol. 9(1), pages 59-83.
    31. Cohen, Daniel, 1990. "Debt Relief: Implications of Secondary Market Discounts and Debt Overhangs," World Bank Economic Review, World Bank Group, vol. 4(1), pages 43-53, January.
    32. Bowe, Michael & Dean, James W, 1993. "Debt-Equity Swaps: Investment Incentive Effects and Secondary Market Prices," Oxford Economic Papers, Oxford University Press, vol. 45(1), pages 130-47, January.
    33. W. Max Corden, 1988. "An International Debt Facility?," IMF Staff Papers, Palgrave Macmillan, vol. 35(3), pages 401-421, September.
    34. Fernandez-Ruiz, Jorge, 1996. "Debt and incentives in a dynamic context," Journal of International Economics, Elsevier, vol. 41(1-2), pages 139-151, August.
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    Cited by:
    1. Claudia M. Buch & Ralph P. Heinrich & Lusine Lusinyan & Mechthild Schrooten, 2000. "Russia's Debt Crisis and the Unofficial Economy," Discussion Papers of DIW Berlin 208, DIW Berlin, German Institute for Economic Research.
    2. Beoy Kui Ng & Andreas Thorud, 2006. "China’s “Triangle of Woes” and Its Impact on Financial Stability," Economic Growth centre Working Paper Series 0605, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
    3. Michael D. Bordo & Anna J. Schwartz, 2000. "Measuring Real Economic Effects of Bailouts: Historical Perspectives on How Countries in Financial Distress Have Fared With and Without Bailouts," NBER Working Papers 7701, National Bureau of Economic Research, Inc.

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