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Debt relief

  • Hayri, Aydin

I develop a model of secondary market pricing of sovereign debt when the creditors can reduce the debt. The sovereign obtains a stochastic revenue flow from the external sector and have a constant debt flow obligation. Default is costly for both the sovereign and the creditors and the possibility to reduce debt creates a surplus. The creditors can capture this surplus only if they can continuously adjust the debt flow.

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File URL: http://www.sciencedirect.com/science/article/B6V6D-4105CKG-6/2/5e220101bb3bb9c98ba35b62c9039598
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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 52 (2000)
Issue (Month): 1 (October)
Pages: 137-152

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Handle: RePEc:eee:inecon:v:52:y:2000:i:1:p:137-152
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  1. Elhanan Helpman, 1989. "Voluntary Debt Reduction: Incentives and Welfare," IMF Staff Papers, Palgrave Macmillan, vol. 36(3), pages 580-611, September.
  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. Jeremy A.Rogoff Bulow & Kenneth, 1986. "A Constant Recontracting Model of Sovereign Debt," University of Chicago - George G. Stigler Center for Study of Economy and State 43, Chicago - Center for Study of Economy and State.
  4. Cohen, Daniel, 1990. "A Valuation Formula for LDC Debt," CEPR Discussion Papers 460, C.E.P.R. Discussion Papers.
  5. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  6. Dooley, Michael & Fernandez-Arias, Eduardo & Kletzer, Kenneth & DEC, 1994. "Is the debt crisis history? Recent private capital inflows to developing countries," Policy Research Working Paper Series 1327, The World Bank.
  7. Leonardo Bartolini & Avinash K. Dixit, 1990. "Market Valuation of Illiquid Debt and Implications for Conflicts Among Creditors," IMF Working Papers 90/88, International Monetary Fund.
  8. Claessens, Stijn & Diwan, Ishac, 1994. "Recent experience with commercial bank debt reduction: Has the "menu" outdone the market?," World Development, Elsevier, vol. 22(2), pages 201-213, February.
  9. Claessens, Stijn & Pennacchi, George, 1996. "Estimating the Likelihood of Mexican Default from the Market Prices of Brady Bonds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(01), pages 109-126, March.
  10. Froot, Kenneth A, 1989. "Buybacks, Exit Bonds, and the Optimality of Debt and Liquidity Relief," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 49-70, February.
  11. Claessens, Stijn & van Wijnbergen, Sweder, 1993. "The 1990 Mexico and Venezuela recapture clauses: An application of average price options," Journal of Banking & Finance, Elsevier, vol. 17(4), pages 733-745, June.
  12. Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
  13. Claessens, Stijn, 1990. "The debt laffer curve: Some estimates," World Development, Elsevier, vol. 18(12), pages 1671-1677, December.
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