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Analysing UDROP: An Instrument for Stabilizing the International Financial Architecture


  • Linder, Axel


This paper analyses implications of a proposal, called UDROP, to reform the standards of international debt contracts. The idea is to give borrowers a roll-over option at maturity for a specified length of time. Using recently developed models of financial crises, the paper shows for which type of crisis UDROP is beneficial. Moral hazard of the borrower is one of the problems UDROP faces which can be addressed by appropriately designing the debt contract. Copyright 2001 by Blackwell Publishers Ltd.

Suggested Citation

  • Linder, Axel, 2001. "Analysing UDROP: An Instrument for Stabilizing the International Financial Architecture," International Finance, Wiley Blackwell, vol. 4(1), pages 47-64, Spring.
  • Handle: RePEc:bla:intfin:v:4:y:2001:i:1:p:47-64

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