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Debt-equity swaps: Panacea or the emperor's new clothes?

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  • Huss, Hans-Joachim

Abstract

Among recently discussed financial innovations aiming at facilitating financial problems of developing countries debt-equity swaps (DES) have received considerable attention and have been greeted by some advocates with enthusiasm (Fierman 1987, Rundt 1986). This paper analyzes how debt-equity swaps can be of benefit to highly indebted developing countries. In particular, it will be analyzed whether these swaps can be implemented without harming old creditors and thus hampering new lending. If this condition is fulfilled, swaps possibly provide an exit option for individual banks from syndicated rescheduling and thus might facilitate rescheduling negotiations through a reduction of the number of participating banks. The paper is organized in four chapters. Following the introduction, chapter II provides a general description and some background on the implementation of debt-equity swaps. Chapter III tries to set up a framework for the analysis of benefits and costs associated with these swaps, as they are suggested in the literature. In chapter IV, this conceptual framework is used for a general evaluation as well as some concluding remarks are provided.

Suggested Citation

  • Huss, Hans-Joachim, 1988. "Debt-equity swaps: Panacea or the emperor's new clothes?," Kiel Working Papers 328, Kiel Institute for the World Economy (IfW Kiel).
  • Handle: RePEc:zbw:ifwkwp:328
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    References listed on IDEAS

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    1. Spieles, Wolfgang, 1987. "Debt-equity swaps and the heavily indebted countries," Intereconomics – Review of European Economic Policy (1966 - 1988), ZBW - Leibniz Information Centre for Economics, vol. 22(3), pages 120-124.
    2. Franke, Günter, 1987. "Economic analysis of debt-equity-swaps," Discussion Papers, Series II 23, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    3. repec:ilo:ilowps:248521 is not listed on IDEAS
    4. Jamuna Agarwal, 1980. "Determinants of foreign direct investment: A survey," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 116(4), pages 739-773, December.
    5. Hiemenz U. & Langhammer, Rolf J., 1986. "Efficiency pre-conditions for successful integration of developing countries into the world economy," ILO Working Papers 992485213402676, International Labour Organization.
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    Cited by:

    1. Corsepius, Uwe, 1988. "Government regulations, external financing and economic performance: The case of Mexico," Kiel Working Papers 345, Kiel Institute for the World Economy (IfW Kiel).

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