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Is Aggregation a Problem for Sovereign Debt Restructuring?

  • Barry Eichengreen
  • Ashoka Mody

Reform of the mechanisms and procedures through which problems of sovereign debt sustainability are resolved is at the centre of the effort to make the international financial system less crisis prone. The purported difficulty of coordinating creditors holding distinct bond issues provides one basis for choosing among the reform proposals currently on the table. We assess the significance of this difficulty (‘the aggregation problem’) using evidence on the pricing of international bonds. Our evidence suggests that investors do perceive that aggregation has costs. Plausibly, they worry most about difficulties of information sharing and coordination across issues when the debt in question is an obligation of a country with a significant perceived probability of having to restructure.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/000282803321946840
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 2 (May)
Pages: 80-84

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Handle: RePEc:aea:aecrev:v:93:y:2003:i:2:p:80-84
Note: DOI: 10.1257/000282803321946840
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  1. Eichengreen, Barry & Mody, Ashoka, 2000. "Would collective action clauses raise borrowing costs? - an update and additional results," Policy Research Working Paper Series 2363, The World Bank.
  2. Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc.
  3. Barry Eichengreen & Ashoka Mody, 2000. "Would Collective Action Clauses Raise Borrowing Costs?," NBER Working Papers 7458, National Bureau of Economic Research, Inc.
  4. Michael P. Dooley, 2000. "Can Output Losses Following International Financial Crises be Avoided?," NBER Working Papers 7531, National Bureau of Economic Research, Inc.
  5. Richard Cantor & Frank Packer, 1995. "Sovereign credit ratings," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 1(Jun).
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