Pooling sovereignty risks: The case of environmental treaties and international debt
AbstractA model is analysed in which a sovereign country has independent obligations to repay a creditor bank and to keep an environmental treaty. It is shown that the linkage of both obligations through a cross-default contract may reduce the sovereign risk attached to both the debt and the environmental contracts. Moreover, such a linkage will create an incentive for the sovereign and the bank to engage in a debt-for-natureswap, the anticipation of which increases the initial incentive for a cross-default contract to be entered into.
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 568.
Date of creation: 1993
Date of revision:
Other versions of this item:
- Mohr, Ernst & Thomas, Jonathan P., 1998. "Pooling sovereign risks: The case of environmental treaties and international debt," Journal of Development Economics, Elsevier, vol. 55(1), pages 173-190, February.
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