Can Output Losses Following International Financial Crises be Avoided?
AbstractRecent financial crises in emerging markets have been followed by temporary but substantial losses in output. This paper explores the possibility that threats of such losses are the dominant incentive for repayment of international debt. In this environment private debtors and creditors have strong incentives to design international contracts so that renegotiation is costly. Such contracts generate dead weight losses and proposals for reform of the international monetary system that modify explicit and implicit contractual arrangements and can be welfare improving under special circumstances. However, such proposals might also weaken the incentives that make private international debt possible.
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Date of creation: Feb 2000
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Find related papers by JEL classification:
- F15 - International Economics - - Trade - - - Economic Integration
- F2 - International Economics - - International Factor Movements and International Business
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-02-14 (All new papers)
- NEP-IFN-2000-02-15 (International Finance)
- NEP-MON-2000-02-14 (Monetary Economics)
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