An analysis of debt-reduction schemes initiated by debtor countries
In evaluating the benefits of a voluntary debt reduction scheme, look for efficiency gains that allow both debtor and creditor to gain. In particular certain debt reduction operations can: (i) increase the incentives for growth in highly indebted countries; (ii) allocate risk more efficiently between debtor and creditors; and (iii) signal the credibility of a country's willingness to adjust its economy. Market-based debt conversion is more likely to improve the debtor nations welfare when: (i) the opportunity cost of foreign exchange is low; (ii) there is great probability of default with a deadweight loss to the creditor; (iii) private rather than public debt is swapped for equity investments; (iv) the country has no other way of signalling its commitment; and (v) the country has an extreme case of debt overhang.
|Date of creation:||31 Mar 1989|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Raquel Fernandez & David Kaaret, 1988. "Bank Size, Reputation, and Debt Renegotiation," NBER Working Papers 2704, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:153. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.