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Bankruptcy Proceedings for Sovereign State Insolvency and their Effect on Capital Flows

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Abstract

The paper examines the main issues involved in translating domestic bankruptcy procedures to the sovereign context. It considers some of the principles by which domestic bankruptcy procedures operate, and the extent to which they apply to international lending. Two recent proposals are considered in more detail, that of Krueger (2001) and that of Pettifor (2002). The paper also considers the question of the ex ante effects of a procedure which makes default less costly, and concludes that despite a negative impact on the ability to borrow, the overall welfare effect need not be negative.

Suggested Citation

  • Jonathan Thomas, 2002. "Bankruptcy Proceedings for Sovereign State Insolvency and their Effect on Capital Flows," Edinburgh School of Economics Discussion Paper Series 93, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:93
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    1. Kathrin Berensmann & Angélique Herzberg, 2009. "Sovereign Insolvency Procedures – A Comparative Look At Selected Proposals," Journal of Economic Surveys, Wiley Blackwell, vol. 23(5), pages 856-881, December.
    2. Bedford, Paul & Irwin, Gregor, 2008. "Financial Stability Paper No 4: Reforming the IMF's Lending-into-Arrears Framework," Bank of England Financial Stability Papers 4, Bank of England.

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    More about this item

    Keywords

    sovereign debt; bankruptcy; capital flows;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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