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

  • Thomas, Jonathan P.

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.

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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper DP2003/75.

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Length: 30 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:unu:wpaper:dp2003-75
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  1. Eaton, Jonathan, 1990. "Debt Relief and the International Enforcement of Loan Contracts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 43-56, Winter.
  2. Bulow, Jeremy & Rogoff, Kenneth, 1990. "Cleaning Up Third World Debt without Getting Taken to the Cleaners," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 31-42, Winter.
  3. Alesina, Alberto F & Angeloni, Ignazio & Etro, Federico, 2003. "International Unions," CEPR Discussion Papers 3913, C.E.P.R. Discussion Papers.
  4. Alberto Alesina & Guido Tabellini, 1988. "External Debt, Capital Flight and Political Risk," UCLA Economics Working Papers 538, UCLA Department of Economics.
  5. Michelle White, 2002. "Sovereigns in Distress: Do They Need Bankruptcy?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 287-320.
  6. repec:oup:restud:v:48:y:1981:i:2:p:289-309 is not listed on IDEAS
  7. Barry Eichengreen & Ashoka Mody, 2000. "Would Collective Action Clauses Raise Borrowing Costs?," NBER Working Papers 7458, National Bureau of Economic Research, Inc.
  8. Jeremy Bulow, 2002. "First World Governments and Third World Debt: A Bankruptcy Court for Sovereign Lending?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 229-256.
  9. repec:oup:qjecon:v:112:y:1997:i:1:p:217-51 is not listed on IDEAS
  10. 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.
  11. Nancy Birdsall & John Williamson, 2002. "Delivering on Debt Relief: From IMF Gold to a New Aid Architecture," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 337.
  12. Marcus H. Miller, 2002. "Sovereign Debt Restructuring: New Articles, New Contracts--Or No Change?," Policy Briefs PB02-03, Peterson Institute for International Economics.
  13. Seema Jayachandran, 2004. "Odious Debt," UCLA Economics Online Papers 298, UCLA Department of Economics.
  14. Miller, Marcus & Zhang, Lei, 1998. "Sovereign Liquidity Crises: the Strategic Case for a Payments Standstill," CEPR Discussion Papers 1820, C.E.P.R. Discussion Papers.
  15. Jeffrey D. Sachs, 2002. "Resolving the Debt Crisis of Low-Income Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 257-286.
  16. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
  17. Kenneth Rogoff & Jeromin Zettelmeyer, 2002. "Early Ideas on Sovereign Bankruptcy Reorganization: A Survey," IMF Working Papers 02/57, International Monetary Fund.
  18. Kletzer, Kenneth M, 1984. "Asymmetries of Information and LDC Borrowing with Sovereign Risk," Economic Journal, Royal Economic Society, vol. 94(374), pages 287-307, June.
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