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Crisis Resolution: Next Steps

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Author Info
Ashoka Mody
Barry J. Eichengreen
Kenneth Kletzer

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Abstract

At the April 2003 meeting of the International Monetary and Financial Committees, it was decided to further encourage the contractual approach to smoothing the process of sovereign debt restructuring by encouraging the more widespread use of collective action clauses (CACs) in international bonds. This decision was shaped partly by Mexico's successful launch of a bond subject to New York law but featuring CACs, and by subsequent issues with similar provisions from other emerging market countries. This paper reviews the developments leading up to that event, its implications, and prospects for the future. It asks whether we can expect to see additional issuance by emerging markets of bonds featuring CACs, whether such a trend would in fact help to make the world a safer financial place, and what additional steps might be taken to further enhance modalities for crisis resolution.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/196.

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Length: 58 pages
Date of creation: 04 Nov 2003
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Handle: RePEc:imf:imfwpa:03/196

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Related research
Keywords: Debt restructuring ; Bonds ; Financial crisis ; Collective action clauses ; Economic models ;

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References listed on IDEAS
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.:
  1. Raffer, Kunibert, 1990. "Applying chapter 9 insolvency to international debts: An economically efficient solution with a human face," World Development, Elsevier, vol. 18(2), pages 301-311, February. [Downloadable!] (restricted)
  2. Kenneth M. Kletzer & Brian D. Wright, 2000. "Sovereign Debt as Intertemporal Barter," American Economic Review, American Economic Association, vol. 90(3), pages 621-639, June. [Downloadable!] (restricted)
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  3. Mark Gugiatti & Anthony Richards, 2003. "Do Collective Action Clauses Influence Bond Yields? New Evidence from Emerging Markets," RBA Research Discussion Papers rdp2003-02, Reserve Bank of Australia. [Downloadable!]
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  4. Barry Eichengreen & Ashoka Mody, 2003. "Is Aggregation a Problem for Sovereign Debt Restructuring?," American Economic Review, American Economic Association, vol. 93(2), pages 80-84, May. [Downloadable!]
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  5. Stanley Fischer, 2002. "Financial Crises and Reform of the International Financial System," NBER Working Papers 9297, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Bulow, Jeremy & Rogoff, Kenneth, 1989. "A Constant Recontracting Model of Sovereign Debt," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 155-78, February. [Downloadable!] (restricted)
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  7. Barry Eichengreen & Ashoka Mody, 2000. "Would Collective Action Clauses Raise Borrowing Costs?," NBER Working Papers 7458, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Yunyong Thaicharoen & Törbjörn I. Becker & Anthony J. Richards, 2001. "Bond Restructuring and Moral Hazard: Are Collective Action Clauses Costly?," IMF Working Papers 01/92, International Monetary Fund. [Downloadable!]
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  9. Kenneth Kletzer, 2003. "Sovereign Bond Restructuring: Collective Action Clauses and Official Crisis Intervention," IMF Working Papers 03/134, International Monetary Fund. [Downloadable!]
  10. Morris Goldstein, 2003. "Debt Sustainability, Brazil, and the IMF," Peterson Institute Working Paper Series WP03-1, Peterson Institute for International Economics. [Downloadable!]
Full references

Cited by:
(explanations, 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.)

  1. Chriatian Just, 2004. "The International Financial Architecture: Official Proposals on Crisis Resolution and the Role of the Private Sector," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 73-89, May. [Downloadable!]
  2. Andrew G Haldane & Gregor Irwin & Victoria Saporta, . "Bail out or work out? Theoretical considerations," Bank of England working papers 219, Bank of England. [Downloadable!]
  3. Ran Bi, 2008. "Beneficial Delays in Debt Restructuring Negotiations," IMF Working Papers 08/38, International Monetary Fund. [Downloadable!]
  4. Itay Goldstein & Assaf Razin & Hui Tong, 2008. "Liquidity, Institutional Quality and the Composition of International Equity Outflows," NBER Working Papers 13723, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Andrew G Haldane & Adrian Penalver & Victoria Saporta & Hyun Song Shin, . "Optimal collective action clause thresholds," Bank of England working papers 249, Bank of England. [Downloadable!]
  6. Barry Eichengreen, 2005. "The IMF in a World of Private Capital Markets," Working Papers id:48, esocialsciences.com. [Downloadable!]
    Other versions:
  7. Kenneth Kletzer, 2004. "Resolving sovereign debt crises with collective action clauses," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue Feb. 20. [Downloadable!]
  8. 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. [Downloadable!]
  9. José Wynne & Federico Weinschelbaum, 2004. "Renegotiation, Collective Action Clauses and Sovereign Debt Markets," Econometric Society 2004 Latin American Meetings 153, Econometric Society. [Downloadable!]
    Other versions:
  10. Philip Bond & Hulya Eraslan, 2008. "Strategic Voting over Strategic Proposals," Economics Working Paper Archive 547, The Johns Hopkins University,Department of Economics. [Downloadable!]
  11. Aitor Erce-Domínguez, 2006. "Using standstills to manage sovereign debt crises," Banco de España Working Papers 0636, Banco de España. [Downloadable!]
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