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Sovereign Debt Restructuring Mechanisms--Unintended Consequences of the 2002 IMF Proposal

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  • John F Crean
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    Abstract

    The IMF's 2002 proposal for a new Sovereign Debt Restructuring Mechanism (SDRM) attracted considerable criticism from both emerging market sovereign debt issuers and from private sector financial institutions. This paper outlines the features of the SDRM and its advantages as perceived by the Official Sector. The paper explains the criticisms leveled by emerging market and private sector players. It analyses the likely market responses of lenders in the period prior to any threatened filing under the SDRM and shows how these responses are likely to reduce lending to risky sovereigns and to provoke earlier defaults. With such responses, the expected benefits of any SDRM in terms of the reduction in the frequency and severity of sovereign crises are likely to evaporate.

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    File URL: http://www.economics.utoronto.ca/public/workingPapers/tecipa-452.pdf
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    Bibliographic Info

    Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-452.

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    Length: Unknown pages
    Date of creation: 13 Apr 2012
    Date of revision:
    Handle: RePEc:tor:tecipa:tecipa-452

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    Related research

    Keywords: SDRM; Sovereign Debt; Sovereign Risk; International Capital Flows; Trade Finance; Moratorium; Foreign Exchange Controls;

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