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Would Collective Action Clauses Raise Borrowing Costs? An Update and Additional Results

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Author Info

  • Barry Eichengreen

    (University of California at Berkeley)

  • Ashoka Mody

    (World Bank Development Prospects Group)

Abstract

This paper updates earlier findings concerning the impact of collective-action clauses on borrowing costs. It has been argued that only in recent quarters have investors focused on the presence of these provisions, and that, given the international financial institutions' newfound resolve to "bail in" investors, they now regard these clauses with trepidation. Extending our data to 1999, we find no evidence of such changes but, rather, the same pattern as before: collective-action clauses raise costs of borrowing for low-rated issuers but reduce them for issuers with high credit ratings. We drop a special case -- Israel - - and show that this has no impact on the results. And we show that the same results hold for sovereign borrowers alone. We argue that these results should reassure those who regard collective action clauses as an important element in the campaign to strengthen the international financial architecture.

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File URL: http://128.118.178.162/eps/if/papers/0012/0012003.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0012003.

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Length: 20 pages
Date of creation: 09 Feb 2001
Date of revision:
Handle: RePEc:wpa:wuwpif:0012003

Note: 20 pages, Acrobat .pdf
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Web page: http://128.118.178.162

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  1. Eichengreen, Barry & Mody, Ashoka, 1999. "Would Collective Action Clauses Raise Borrowing Costs?," CEPR Discussion Papers 2343, C.E.P.R. Discussion Papers.
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Cited by:
  1. Rohan Pitchford & Mark L. J. Wright, 2008. "Holdouts In Sovereign Debt Restructuring: A Theory Of Negotiation In A Weak Contractual Environment," CAMA Working Papers 2008-37, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Andrew G Haldane & Adrian Penalver & Victoria Saporta & Hyun Song Shin, 2005. "Optimal collective action clause thresholds," Bank of England working papers 249, Bank of England.
  3. Häseler, Sönke, 2010. "Trustees versus Fiscal Agents and Default Risk in International Sovereign Bonds," MPRA Paper 21918, University Library of Munich, Germany.
  4. Eichengreen, Barry & Mody, Ashoka, 2003. "Is Aggregation a Problem for Sovereign Debt Restructuring?," CEPR Discussion Papers 3771, C.E.P.R. Discussion Papers.

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