This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Is Debt Relief Efficient?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Serkan Arslanalp
Peter Blair Henry

Additional information is available for the following registered author(s):

Abstract

When Less Developed Countries (LDCs) announce debt relief agreements under the Brady Plan, their stock markets appreciate by an average of 60 percent in real dollar terms a $42 billion increase in shareholder value. In contrast, there is no significant stock market increase for a control group of LDCs that do not sign Brady agreements. The results persist after controlling for IMF programs, trade liberalizations, capital account liberalizations, and privatization programs. The stock market appreciations successfully forecast higher future net resource transfers, investment and growth. Creditors also benefit from the Brady Plan. Controlling for other factors, stock prices of US commercial banks with significant LDC loan exposure rise by 35 percent a $13 billion increase in shareholder value. The results suggest that debt relief can generate large efficiency gains when the borrower suffers from debt overhang.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w10217.pdf
File Format: application/pdf
File Function:
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10217.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Jan 2004
Date of revision:
Handle: RePEc:nbr:nberwo:10217

Note: IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
F3 - International Economics - - International Finance
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

This paper has been announced in the following NEP Reports:

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. Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Blackwell Publishing, vol. 48(2), pages 289-309, April. [Downloadable!] (restricted)
  2. Michael Bruno & William Easterly, 1996. "Inflation's Children: Tales of Crises that Beget Reforms," NBER Working Papers 5452, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. 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. [Downloadable!] (restricted)
  4. Rene M. Stulz, 2000. "U.S. Banks, Crises, and Bailouts: From Mexico to LTCM," NBER Working Papers 7529, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Serkan Arslanalp & Peter Blair Henry, 2006. "Debt Relief," NBER Working Papers 12187, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
    • Arslanalp, Serkan & Henry, Peter B., 2006. "Debt Relief," Research Papers 1931, Stanford University, Graduate School of Business. [Downloadable!]
  6. Bulow, Jeremy & Rogoff, Kenneth, 1989. "Sovereign Debt: Is to Forgive to Forget?," American Economic Review, American Economic Association, vol. 79(1), pages 43-50, March. [Downloadable!] (restricted)
    Other versions:
  7. Peter Blair Henry, 2003. "Capital Account Liberalization, The Cost of Capital, and Economic Growth," NBER Working Papers 9488, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Peter Blair Henry, 2002. "Is Disinflation Good for the Stock Market?," Journal of Finance, American Finance Association, vol. 57(4), pages 1617-1648, 08. [Downloadable!] (restricted)
    Other versions:
  9. Demirguc-Kunt, Asli & Huizinga, Harry, 1993. "Official Credits to Developing Countries: Implicit Transfers to the Banks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 430-44, August. [Downloadable!] (restricted)
    Other versions:
  10. 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)
    Other versions:
  11. Collins, Susan M, 1990. "Lessons from Korean Economic Growth," American Economic Review, American Economic Association, vol. 80(2), pages 104-07, May. [Downloadable!] (restricted)
  12. Henry, Peter Blair, 2000. "Do stock market liberalizations cause investment booms?," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 301-334. [Downloadable!] (restricted)
  13. William L. Megginson & Jeffry M. Netter, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June. [Downloadable!] (restricted)
  14. Tesar, Linda L & Werner, Ingrid M, 1995. "U.S. Equity Investment in Emerging Stock Markets," World Bank Economic Review, Oxford University Press, vol. 9(1), pages 109-29, January.
  15. Peter Blair Henry, 2000. "Stock Market Liberalization, Economic Reform, and Emerging Market Equity Prices," Journal of Finance, American Finance Association, vol. 55(2), pages 529-564, 04. [Downloadable!] (restricted)
  16. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November. [Downloadable!] (restricted)
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. Nicolas Depetris Chauvin & Aart Kraay, 2005. "What Has 100 Billion Dollars Worth of Debt Relief Done for Low- Income Countries?," International Finance 0510001, EconWPA. [Downloadable!]
  2. Imbs, Jean & Ranciere, Romain, 2005. "The overhang hangover," Policy Research Working Paper Series 3673, The World Bank. [Downloadable!]
    Other versions:
  3. Ralf Hepp, 2005. "Consequences of Debt Relief Initiatives in the 1990s," International Finance 0510004, EconWPA. [Downloadable!]
  4. Henry, Peter B., 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Research Papers 1974, Stanford University, Graduate School of Business. [Downloadable!]
    Other versions:
  5. Henry, Peter B. & Arslanalp, Serkan, 2003. "Helping the Poor to Help Themselves: Debt Relief or Aid?," Research Papers 1838, Stanford University, Graduate School of Business. [Downloadable!]
    Other versions:
  6. Serkan Arslanalp & Peter Blair Henry, 2006. "Debt Relief," NBER Working Papers 12187, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
    • Arslanalp, Serkan & Henry, Peter B., 2006. "Debt Relief," Research Papers 1931, Stanford University, Graduate School of Business. [Downloadable!]
  7. Silvia Marchesi & Alessandro Missale, 2007. "How defensive were lending and aid to HIPC?," Working Papers 115, University of Milano-Bicocca, Department of Economics, revised 2007. [Downloadable!]
  8. Jie Yang & Dan Nyberg, 2009. "External Debt Sustainability in HIPC Completion Point Countries: An Update," IMF Working Papers 09/128, International Monetary Fund. [Downloadable!]
  9. Flores Prieto, Pedro & Fullerton, Thomas M., Jr. & Andrade Olivas, Cesar, 2007. "Evidencia empirica sobre deuda externa, inversion, y crecimiento en Mexico, 1980-2003
    [Empirical evidence on foreign debt, investment, and growth in Mexico, 1980-2003]    ," MPRA Paper 9497, University Library of Munich, Germany, revised Apr 2007. [Downloadable!]
Statistics
Access and download statistics

Did you know? About five million pdf files are downloaded through RePEc every year.

This page was last updated on 2009-11-21.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.