Assessments regarding the effectiveness of sovereign debt restructurings are often summarized by comparisons of the net present value of debt service before and after the restructuring. These calculations are inherently sensitive to the choice of discount rate. This paper explores issues that arise in selecting discount rates when evaluating sovereign debt restructurings. It suggests using a range of discount rates and centering the analysis around the internal rate of return to assess whether the debt restructuring has generated net present value savings or costs to the debtor.
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Daniel Cohen & Jeffrey Sachs, 1991.
"Growth and External Debt Under Risk of Debt Repudiation,"
NBER Chapters,
in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 437-472
National Bureau of Economic Research, Inc.
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