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Crisis resolution: next steps

  • Barry Eichengreen
  • Kenneth Kletzer
  • Ashoka Mody

At the April 2003 meeting of the International Monetary and Financial Committees, it was decided to further encourage the contractual approach to smoothing the process of sovereign debt restructuring by encouraging the more widespread use of collective action clauses (CACs) in international bonds. This decision was shaped partly by Mexico's successful launch of a bond subject to New York law but featuring CACs, and by subsequent issues with similar provisions from other emerging market countries. This paper reviews the developments leading up to that event, its implications, and prospects for the future. It asks whether we can expect to see additional issuance by emerging markets of bonds featuring CACs, whether such a trend would in fact help to make the world a safer financial place, and what additional steps might be taken to further enhance modalities for crisis resolution.

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Paper provided by Federal Reserve Bank of San Francisco in its series Pacific Basin Working Paper Series with number 03-05.

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Date of creation: 2003
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Handle: RePEc:fip:fedfpb:03-05
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  1. Becker, Torbjorn & Richards, Anthony & Thaicharoen, Yunyong, 2003. "Bond restructuring and moral hazard: are collective action clauses costly?," Journal of International Economics, Elsevier, vol. 61(1), pages 127-161, October.
  2. Morris Goldstein, 2003. "Debt Sustainability, Brazil, and the IMF," Working Paper Series WP03-1, Peterson Institute for International Economics.
  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. Kenneth M. Kletzer & Brian D. Wright, 2000. "Sovereign Debt as Intertemporal Barter," International Finance 0003004, EconWPA.
  5. Kenneth Kletzer, 2003. "Sovereign Bond Restructuring; Collective Action Clauses and official Crisis Intervention," IMF Working Papers 03/134, International Monetary Fund.
  6. Peter B. Kenen, 2001. "International Financial Architecture: What's New? What's Missing?, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 335.
  7. Raffer, Kunibert, 1990. "Applying chapter 9 insolvency to international debts: An economically efficient solution with a human face," World Development, Elsevier, vol. 18(2), pages 301-311, February.
  8. Barry Eichengreen & Ashoka Mody, 2000. "Would Collective Action Clauses Raise Borrowing Costs?," NBER Working Papers 7458, National Bureau of Economic Research, Inc.
  9. Mark Gugiatti & Anthony Richards, 2003. "Do Collective Action Clauses Influence Bond Yields? New Evidence from Emerging Markets," RBA Research Discussion Papers rdp2003-02, Reserve Bank of Australia.
  10. Eichengreen, Barry, 2002. "Financial Crises and What to Do About Them," OUP Catalogue, Oxford University Press, number 9780199257447, March.
  11. Stanley Fischer, 2002. "Financial Crises and Reform of the International Financial System," NBER Working Papers 9297, National Bureau of Economic Research, Inc.
  12. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, March.
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