Burden-sharing among official and private creditors
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.
|Date of creation:||31 Aug 1992|
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- Fernandez-Arias, Eduardo, 1991. "A dynamic bargaining model of sovereign debt," Policy Research Working Paper Series 778, The World Bank.
- 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.