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"Burden sharing" in sovereign debt reduction

Listed author(s):
  • Spiegel, Mark M.

We examine a concerted debt reduction deal between a sovereign debtor, a private creditor, and an official creditor, who insures the deposits of the commercial bank. Our results show that a weakening of the financial position of the commercial bank reduces the contribution of the commercial bank and increases that of the official creditor, without affecting the net terms faced by the debtor. This result is robust to changes in seniority. Moreover, leaving both creditor values unchanged requires that commercial banks retire debt at "unfairly" high prices, while official creditors make a net contribution.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304-3878(96)00405-1
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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 50 (1996)
Issue (Month): 2 (August)
Pages: 337-351

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Handle: RePEc:eee:deveco:v:50:y:1996:i:2:p:337-351
Contact details of provider: Web page: http://www.elsevier.com/locate/devec

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  1. Demirguc-Kunt, Asli & Fernandez-Arias, Eduardo, 1992. "Burden-sharing among official and private creditors," Policy Research Working Paper Series 943, The World Bank.
  2. Diwan, Ishac & Spiegel, Mark M., 1994. "Are buybacks back? Menu-driven debt reduction schemes with heterogeneous creditors," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 279-293, October.
  3. Demirguc-Kunt, A. & Diwan, I. & Spiegel, M.M., 1993. "Heterogeneity in Bank Valuation of LCD Debt: Evidence from the 1988 Brazilian Debt-Reduction Program," Working Papers 93-33, C.V. Starr Center for Applied Economics, New York University.
  4. Demirguc-Kunt, Asli & Huizinga, Harry, 1991. "Official credits to developing countries : implicit transfers to the banks," Policy Research Working Paper Series 592, The World Bank.
  5. Jeremy Bulow & Kenneth Rogoff & Afonso S. Bevilaqua, 1992. "Official Creditor Seniority and Burden-Sharing in the Former Soviet Bloc," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 195-234.
  6. Ishac Diwan & Dani Rodrik, 1992. "Debt Reduction, Adjustment Lending, and Burden Sharing," NBER Working Papers 4007, National Bureau of Economic Research, Inc.
  7. Michael Dooley & Richard D. Haas & Steven Symansky, 1993. "A Note on Burden Sharing among Creditors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 226-232, March.
  8. Jeremy Bulow & Kenneth Rogoff, 1991. "Sovereign Debt Repurchases: No Cure for Overhang," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1219-1235.
  9. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
  10. Claessens,Constantijn A.*Diwan, Ishac*Fernandez-, 1992. "Recent experience with commercial bank debt reduction," Policy Research Working Paper Series 995, The World Bank.
  11. Kenneth A. Froot, 1988. "Buybacks, Exit Bonds, and the Optimality of Debt and Liquidity Relief," NBER Working Papers 2675, National Bureau of Economic Research, Inc.
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