Recent experience with commercial bank debt reduction
The authors review the case for market-based debt reduction and concerted debt reduction. They explain the new menu-based approach to debt reduction and discuss why it may be preferred to market-based and concerted debt reduction. In a review of the five recent debt-reduction agreements, they find that the menu approach indeed achieved debt reduction at substantially lower costs than a comparable market-based operation. By one measure, the five countries may have saved more than $8 billion. Even a menu-based approach to debt reduction, however, is unlikely to directly benefit the debtor financially. They find that the debtors suffered financial losses equal to a few percent of their GDPs. Indirect benefits, or efficiency gains associated with debt reduction, are necessary to make the operation benefit the debtor.
|Date of creation:||31 Oct 1992|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
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.:
- Lamdany, R. & Underwood, J., 1989. "Illustrative Effects Of Voluntary Debt And Debt Service Reduction Operations," World Bank - Discussion Papers 66, World Bank.
- Fernandez, Raquel & Ozler, Sule, 1991. "Debt concentration and secondary market prices," Policy Research Working Paper Series 570, The World Bank.
- van Wijnbergen, Sweder, 1991. "Debt Relief and Economic Growth in Mexico," World Bank Economic Review, World Bank Group, vol. 5(3), pages 437-55, September.
- Fernandez-Arias, Eduardo, 1991. "A dynamic bargaining model of sovereign debt," Policy Research Working Paper Series 778, The World Bank.
- Fernandez-Arias, Eduardo, 1993. "Costs and benefits of debt and debt service reduction," Policy Research Working Paper Series 1169, The World Bank.
- Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Wiley Blackwell, vol. 48(2), pages 289-309, April.
- Paul R. Krugman, 1988. "Market-Based Debt-Reduction Schemes," NBER Working Papers 2587, National Bureau of Economic Research, Inc.
- Carmichael, Jeffrey, 1989. "The Debt Crisis: Where Do We Stand after Seven Years?," World Bank Research Observer, World Bank Group, vol. 4(2), pages 121-42, July.
- Claessens, Stijn & van Wijnbergen, Sweder, 1990. "An option - pricing approach to secondary market debt : applied to Mexico," Policy Research Working Paper Series 333, The World Bank.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:995. 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.