Debt Hold Up and International Lending
Are lending contracts between international financial institutions (IFIs) and sovereign borrowers optimal? To address this question this paper builds on two ideas. First, the prospect of future debt relief can make it profitable for an IFI to continue lending even if lending contracts are currently violated. Second, some policy makers may prefer not implement reform contract and this preference remains unobserved to the IFI. Hence, some governments may strategically implement contracts in order to accumulate debt. When the debt stock becomes sufficiently large, it can be used as an â€œhold upâ€ instrument, enabling the government to implement its preferred policy, assured that lending will continue. To mitigate the risk of â€œhold upâ€ , the IFI may use lending contracts to screen such borrowers, leading to distorted reform contracts.
|Date of creation:||11 Aug 2004|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rodney Ramcharan, 2003. "Reputation, Debt, and Policy Conditionality," IMF Working Papers 03/192, International Monetary Fund.
- Mohsin S. Khan & Sunil Sharma, 2001. "IMF Conditionality and Country Ownership of Programs," IMF Working Papers 01/142, International Monetary Fund.
- Collier, Paul & Gunning, Jan Willem, 1999.
"The IMF's Role in Structural Adjustment,"
Royal Economic Society, vol. 109(459), pages 634-651, November.
- Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
- Casella, Alessandra & Eichengreen, Barry, 1994.
"Can Foreign Aid Accelerate Stabilization?,"
CEPR Discussion Papers
961, C.E.P.R. Discussion Papers.
- Barro, Robert J. & Lee, Jong-Wha, 2005.
"IMF programs: Who is chosen and what are the effects?,"
Journal of Monetary Economics,
Elsevier, vol. 52(7), pages 1245-1269, October.
- Robert J. Barro & Jong-Wha Lee, 2002. "IMF Programs: Who is Chosen and What Are the Effects?," NBER Working Papers 8951, National Bureau of Economic Research, Inc.
- Robert J Barro & Jong-Wha Lee, 2003. "IMF Programs: Who Is Chosen and What Are the Effects?," Departmental Working Papers 2003-09, The Australian National University, Arndt-Corden Department of Economics.
- Drazen, A. & Grilli, V., 1991.
"The Benefits of Crisis for Economic Reforms,"
27-91, Tel Aviv.
- Alesina, A. & Drazen, A., 1991.
"Why Are Stabilizations Delayed?,"
6-91, Tel Aviv - the Sackler Institute of Economic Studies.
- repec:fth:oxesaf:99-18 is not listed on IDEAS
- Giulio Federico, 2001. "Samaritans, Rotten Kids and Policy Conditionality," CSAE Working Paper Series 2001-16, Centre for the Study of African Economies, University of Oxford.
- Drazen, Allan, 2002. "Conditionality and Ownership in IMF Lending: A Political Economy Approach," CEPR Discussion Papers 3562, C.E.P.R. Discussion Papers.
- Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-1155, December.
- Alberto Alesina & David Dollar, 1998.
"Who Gives Foreign Aid to Whom and Why?,"
NBER Working Papers
6612, National Bureau of Economic Research, Inc.
- David Dollar & Craig Burnside, 2000.
"Aid, Policies, and Growth,"
American Economic Review,
American Economic Association, vol. 90(4), pages 847-868, September.
- James M. Boughton & Alex Mourmouras, 2002. "Is Policy Ownership An Operational Concept?," IMF Working Papers 02/72, International Monetary Fund.
- repec:oxf:wpaper:wps/2001-16 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:ecm:nasm04:341. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.