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IMF in Theory: Sovereign Debts, Judicialisation and Multilateralism

  • Jérôme Sgard
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    It is argued that the successive regimes for restructuring sovereign debts, since the early 20th century have been shaped by the articulation of three institutional functions: information gathering and economic expertise, then third-party mediation, lastly policy enforcement, also called conditionality. Whereas these functions where integrated within the Fund during the 1980s’ debt crisis, mediation has now been outsourced, under the pressure of the demand by the private sector for a thorough judicialisation of the restructuring process. That is, its inscription within rather rigid procedural rules which would provide much more protection against the interests and the intervention of the sovereigns, especially G7 governments. Two responses to this demand have been formulated: the creation of a supra-national “bankruptcy court”, as envisaged in the SDRM proposal put forward by the IMF in 2001; and the reliance upon national courts, specifically those in which jurisdiction the initial debt contracts had been signed. This latter option corresponds to the contract-based approach to sovereign defaults based on Collective Action Clauses, which was eventually adopted in spring 2003. It is defended that outsourcing third-party mediation makes the IMF considerably much weaker, as it remains with only two functions and no consistent rules of interaction with its traditional partners – private investors and the government of debtor countries.

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    File URL: http://spire.sciencespo.fr/hdl:/2441/6881/resources/sgard-cepii-wp04-21.pdf
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    Paper provided by Sciences Po in its series Sciences Po publications with number 2004-21.

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    Date of creation: Dec 2004
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    Handle: RePEc:spo:wpmain:info:hdl:2441/6881
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    1. Stone Sweet, Alex, 1999. "Judicialization and the Construction of Governance," Center for Culture, Organizations and Politics, Working Paper Series qt2fc6571w, Center for Culture, Organizations and Politics of theInstitute for Research on Labor and Employment, UC Berkeley.
    2. Marc Flandreau, 1997. "Central Bank Cooperation in Historical Perspective: A Sceptical View," Economic History Review, Economic History Society, vol. 50(4), pages 735-763, November.
    3. Gould, Erica R., 2003. "Money Talks: Supplementary Financiers and International Monetary Fund Conditionality," International Organization, Cambridge University Press, vol. 57(03), pages 551-586, June.
    4. Ruggie, John Gerard, 1992. "Multilateralism: the anatomy of an institution," International Organization, Cambridge University Press, vol. 46(03), pages 561-598, June.
    5. Bulow, J. & Rogoff, K., 1988. "Sovereign Debt: Is To Forgive To Forget?," Papers 411, Stockholm - International Economic Studies.
    6. Anna J. Schwartz, 2003. "Do Sovereign Debtors Need a Bankruptcy Law?," Cato Journal, Cato Journal, Cato Institute, vol. 23(1), pages 87-100, Spring/Su.
    7. Stanley Fischer, 1999. "On the Need for an International Lender of Last Resort," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 85-104, Fall.
    8. Michael P. Dooley, 1994. "A Retrospective on the Debt Crisis," NBER Working Papers 4963, National Bureau of Economic Research, Inc.
    9. Nouriel Roubini, 2002. "Do We Need a New Bankruptcy Regime?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 321-333.
    10. Nielson, Daniel L. & Tierney, Michael J., 2003. "Delegation to International Organizations: Agency Theory and World Bank Environmental Reform," International Organization, Cambridge University Press, vol. 57(02), pages 241-276, March.
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