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Settling Defaults in the Era of Bond Finance

  • Eichengreen, Barry
  • Portes, Richard

We scrutinize two strands of received wisdom about debt crises: that which draws a strong contrast between the 1930s and 1980s in extent of default and ease of settlement, and that which attributes the difference to greater government involvement today. Rather than a sharp, dichotomous variable, default in the 1930s was often partial and intermittent. Neither was settlement achieved in a way that readily permitted countries to put the debt crisis behind them. And creditor-country governments were often intimately involved in the process of debt negotiation. We consider a number of additional factors influencing the ease of settlement: (i) institutional features of the lending process; (ii) institutional features of the settlement process; (iii) the role of national divisions within the creditor community; (iv) the influence of global commodity- and credit-market conditions over the process of settlement.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 272.

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Date of creation: Sep 1988
Date of revision:
Handle: RePEc:cpr:ceprdp:272
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