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Sovereign debt workouts with the IMF as delegated monitor - a common agency approach

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  • Prasanna Gai
  • Nicholas Vause

Abstract

IMF programmes are frequently criticised for lacking focus and being ineffective in helping maintain private credit lines following a debt crisis. A theoretical model is developed to explore the interlinkages between result-based conditionality and creditor collective action problems. The strategic interactions between official and private creditors are highlighted, and some of the trade-offs that underpin the design of IMF programmes are clarified. Conditions under which official creditors are able to limit the efficiency losses generated by creditor non-cooperation and debtor moral hazard are identified. The circumstances under which official lending is able to catalyse private sector finance are also analysed.

Suggested Citation

  • Prasanna Gai & Nicholas Vause, 2003. "Sovereign debt workouts with the IMF as delegated monitor - a common agency approach," Bank of England working papers 187, Bank of England.
    • Handle: RePEc:boe:boeewp:187
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    File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/2003/wp187.pdf
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    References listed on IDEAS

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    Cited by:

    1. Eichengreen, Barry & Kletzer, Kenneth & Mody, Ashoka, 2006. "The IMF in a world of private capital markets," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1335-1357, May.
    2. Axel Dreher, 2009. "IMF conditionality: theory and evidence," Public Choice, Springer, vol. 141(1), pages 233-267, October.

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