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Burden-sharing among official and private creditors

Author

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  • Demirguc-Kunt, Asli
  • Fernandez-Arias, Eduardo

Abstract

The authors analyze how the burden of the debt crisis has been shared by various classes of creditors. Given the rising share of official debt in the total debt of developing countries, official creditors have a growing need to develop a burden-sharing indicator. This paper represents the very first step in this direction. To assess burden-sharing, the unobservable implied prices of official debt need to be estimated. The authors first analyze how, in a seniority-based corporate debt model, information on these implied prices can be recovered by looking at the differential impact of various stocks of debt on the market price. They analyze the validity and drawbacks of this model for the sovereign debt case and conclude that seniority sharing rules are probably not appropriate. They then show that implied prices are still identified under more general sharing rules, which allows them to relax the assumption and still be able to derive relevant inferences. A suitable multicreditor debt valuation model, dependent on the stock of private debt and the debt shares of various creditors, is then derived and estimated.

Suggested Citation

  • Demirguc-Kunt, Asli & Fernandez-Arias, Eduardo, 1992. "Burden-sharing among official and private creditors," Policy Research Working Paper Series 943, The World Bank.
  • Handle: RePEc:wbk:wbrwps:943
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    References listed on IDEAS

    as
    1. Fernandez-Arias, Eduardo, 1991. "A dynamic bargaining model of sovereign debt," Policy Research Working Paper Series 778, The World Bank.
    2. Daniel Cohen, 1992. "The Debt Crisis: A Postmortem," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 65-114, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Charles C. Chang & Eduardo Fernández-Arias & Luis Serven, 1998. "Measuring Aid Flows: A New Approach," Research Department Publications 4146, Inter-American Development Bank, Research Department.
    2. Klimenko, Mikhail M., 2002. "Trade interdependence, the international financial institutions, and the recent evolution of sovereign-debt renegotiations," Journal of International Economics, Elsevier, vol. 58(1), pages 177-209, October.
    3. Eaton, Jonathan & Fernandez, Raquel, 1995. "Sovereign debt," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 3, pages 2031-2077, Elsevier.
    4. Spiegel, Mark M., 1996. ""Burden sharing" in sovereign debt reduction," Journal of Development Economics, Elsevier, vol. 50(2), pages 337-351, August.
    5. Michael P. Dooley & Eduardo Fernandez-Arias & Kenneth M. Kletzer, 1994. "Recent Private Capital Inflows to Developing Countries: Is the Debt Crisis History?," NBER Working Papers 4792, National Bureau of Economic Research, Inc.
    6. Fernandez-Arias, Eduardo, 1996. "The new wave of private capital inflows: Push or pull?," Journal of Development Economics, Elsevier, vol. 48(2), pages 389-418, March.
    7. Charles C. Chang & Eduardo Fernández-Arias & Luis Serven, 1998. "Cuantificación de los flujos de asistencia: un nuevo enfoque," Research Department Publications 4147, Inter-American Development Bank, Research Department.

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