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Resolving Debt Crises: An Historical Perspective

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  • Barry Eichengreen

Abstract

Two general approaches have been offered for dealing with the developing country debt crisis: continued reliance on case-by-case negotiation, versus global plans for fundamentally restructuring the terms of international lending and repayment. Both approaches have precedents in earlier historical periods. In the 1930s, for instance, when some two thirds of foreign dollar bonds lapsed into default, several global schemes for resolving the crisis were considered even while individual debtor- creditor negotiations were underway. In the end no global plan was adopted and the debt crisis of the 30s was resolved by the muddling-through approach of case-by-case negotiation. This experience suggests two questions about the efficacy of the alternative approaches. First, what stumbling blocks stand in the way of the adoption of global schemes? Second, as a crisis drags on, how do the evolution of debtor and creditor strategies permit it to be resolved through bilateral negotiation? In this paper historical evidence from the interwar period is addressed to these questions.

Suggested Citation

  • Barry Eichengreen, 1988. "Resolving Debt Crises: An Historical Perspective," NBER Working Papers 2555, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:2555 Note: ITI IFM
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    1. Stanley Fischer, 1987. "Resolving the International Debt Crisis," NBER Working Papers 2373, National Bureau of Economic Research, Inc.
    2. Eichengreen, Barry & Portes, Richard, 1986. "The Anatomy of Financial Crises," CEPR Discussion Papers 130, C.E.P.R. Discussion Papers.
    3. Barry Eichengreen, 1986. "The Political Economy of the Smoot-Hawley Tariff," NBER Working Papers 2001, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Bruce, Neil & Waldman, Michael, 1991. "Transfers in Kind: Why They Can Be Efficient and Nonpaternalistic," American Economic Review, American Economic Association, pages 1345-1351.
    2. Siebert, Horst, 1989. "Güterwirtschaftliche Anpassungsprozesse zur Lösung der Verschuldungsfrage," Kiel Working Papers 349, Kiel Institute for the World Economy (IfW).
    3. Mortimore, Michael & Stanley, Leonardo, 2006. "Has investor protection been rendered obsolete by the Argentine crisis?," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    4. Gundlach, Erich & Scheide, Joachim & Sinn, Stefan, 1990. "Die Entwicklung nationaler Auslandsvermögenspositionen: Konsequenzen für die Wirtschaftspolitik," Open Access Publications from Kiel Institute for the World Economy 414, Kiel Institute for the World Economy (IfW).

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