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Would Collective Action Clauses Raise Borrowing Costs? An Update and Additional Results

  • Barry Eichengreen

    (University of California at Berkeley)

  • Ashoka Mody

    (World Bank Development Prospects Group)

This paper updates earlier findings concerning the impact of collective-action clauses on borrowing costs. It has been argued that only in recent quarters have investors focused on the presence of these provisions, and that, given the international financial institutions' newfound resolve to "bail in" investors, they now regard these clauses with trepidation. Extending our data to 1999, we find no evidence of such changes but, rather, the same pattern as before: collective-action clauses raise costs of borrowing for low-rated issuers but reduce them for issuers with high credit ratings. We drop a special case -- Israel - - and show that this has no impact on the results. And we show that the same results hold for sovereign borrowers alone. We argue that these results should reassure those who regard collective action clauses as an important element in the campaign to strengthen the international financial architecture.

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File URL: http://econwpa.repec.org/eps/if/papers/0012/0012003.pdf
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Paper provided by EconWPA in its series International Finance with number 0012003.

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Length: 20 pages
Date of creation: 09 Feb 2001
Date of revision:
Handle: RePEc:wpa:wuwpif:0012003
Note: 20 pages, Acrobat .pdf
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Barry Eichengreen & Ashoka Mody, 2000. "Would Collective Action Clauses Raise Borrowing Costs?," NBER Working Papers 7458, National Bureau of Economic Research, Inc.
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