Advanced Search
MyIDEAS: Login

Bargaining over debt rescheduling

Contents:

Author Info

  • Prokop, Jacek

Abstract

The objective of this paper is to investigate the bargaining over debt rescheduling between a sovereign borrower and a foreign lender in a more general framework than in the preceding literature. We propose a model in which the impact of the bargaining power of the creditor and the debtor can be analyzed in the situation of debt overhang. The concept of Nash bargaining solution is applied to predict the behaviour of international financial market’s participants. The extended framework of debt renegotiations allows to identify several possible equilibria that could serve as potential resolutions of the debt overhang problem. In an illustrative numerical example, we show that a significant level of forgiveness on the part of the lenders is indispensible in the process of bargaining over debt rescheduling. However, the actual size of the forgiveness varies with the specific distribution of the bargaining power between the debtor and the creditor.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. 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://mpra.ub.uni-muenchen.de/44315/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 44315.

as in new window
Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:pra:mprapa:44315

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: debt rescheduling; foreign borrowing; international debt overhang; bargaining;

Find related papers by JEL classification:

References

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.:
as in new window
  1. José Wynne & Federico Weinschelbaum, 2004. "Renegotiation, Collective Action Clauses and Sovereign Debt Markets," Econometric Society 2004 Latin American Meetings 153, Econometric Society.
  2. Prokop, J., 1991. "Dynamic of International Debt Overhang with two Lender Banks," Working papers 946, Wisconsin Madison - Social Systems.
  3. Jeromin Zettelmeyer & Kenneth Rogoff, 2002. "Bankruptcy Procedures for Sovereigns: A History of Ideas, 1976--2001," IMF Working Papers 02/133, International Monetary Fund.
  4. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  5. Jeffrey D. Sachs, 2002. "Resolving the Debt Crisis of Low-Income Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 257-286.
  6. Hélène Poirson & Luca Antonio Ricci & Catherine A. Pattillo, 2002. "External Debt and Growth," IMF Working Papers 02/69, International Monetary Fund.
  7. Vivian Z. Yue, 2005. "Sovereign Default and Debt Renegotiation," 2005 Meeting Papers 138, Society for Economic Dynamics.
  8. Presbitero, Andrea F., 2007. "The debt-growth nexus in poor countries: a reassessment," Economics Discussion Papers 2007-17, Kiel Institute for the World Economy.
  9. Prokop, Jacek, 1992. "Duration of debt overhang with two lender banks," Economics Letters, Elsevier, vol. 38(4), pages 473-478, April.
  10. Shuanglin Lin & Kim Sosin, 2001. "Foreign debt and economic growth," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(3), pages 635-655, November.
  11. Andrew Atkeson, 2010. "International lending with moral hazard and risk of repudiation," Levine's Working Paper Archive 200, David K. Levine.
  12. Mamoru Kaneko & Jacek Prokop, 1991. "A Game Theoretical Approach to the International Debt Overhang," Discussion Papers 945, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Diwan, Ishac & Spiegel, Mark M., 1991. "Are buybacks back? Menu-driven debt-reduction schemes with heterogenous creditors," Policy Research Working Paper Series 675, The World Bank.
  14. Jeremy A.Rogoff Bulow & Kenneth, 1986. "A Constant Recontracting Model of Sovereign Debt," University of Chicago - George G. Stigler Center for Study of Economy and State 43, Chicago - Center for Study of Economy and State.
  15. Brian D. Wright & Kenneth M. Kletzer, 2000. "Sovereign Debt as Intertemporal Barter," American Economic Review, American Economic Association, vol. 90(3), pages 621-639, June.
  16. Prokop, Jacek, 1995. "Organized debt buybacks: No cure for free riding?," Journal of Development Economics, Elsevier, vol. 47(2), pages 481-496, August.
  17. Harold L. Cole & Timothy J. Kehoe, 1998. "Self-Fulfilling Debt Crises," Levine's Working Paper Archive 114, David K. Levine.
  18. Fernandez, Raquel & Kaaret, David, 1992. "Bank Heterogeneity, Reputation and Debt Renegotiation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 61-78, February.
  19. Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Wiley Blackwell, vol. 48(2), pages 289-309, April.
  20. Fernandez, Raquel & Rosenthal, Robert W, 1990. "Strategic Models of Sovereign-Debt Renegotiations," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 331-49, July.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:44315. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.