Resolving Debt Crises: An Historical Perspective
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.
|Date of creation:||Apr 1988|
|Date of revision:|
|Publication status:||published as Debt, Adjustment and Recovery, edited by Sebastian Edwards and Felipe Larrain, pp. 68-96. Oxford: Basil Blackwell Ltd., 1989.|
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- Barry Eichengreen & Richard Portes, 1987.
"The Anatomy of Financial Crises,"
NBER Working Papers
2126, National Bureau of Economic Research, Inc.
- Stanley Fischer, 1987. "Resolving the International Debt Crisis," NBER Working Papers 2373, National Bureau of Economic Research, Inc.
- 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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