Coordination failure, moral hazard and sovereign bankruptcy procedures
Ghosal, Sayantan and Miller, Marcus, 1941- (2003) Coordination failure, moral hazard and sovereign bankruptcy procedures. Discussion Paper. London: Centre for Economic Policy Research (Great Britain). Discussion paper (Centre for Economic Policy Research (Great Britain)) (No.372).
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We study a model of sovereign debt crisis that combines problems of creditor co-ordination and debtor moral hazard. Solving the sovereign debtor’s incentives leads to excessive ‘rollover failure’ by creditors when sovereign default occurs. We discuss how the incidence of crises might be reduced by international sovereign bankruptcy procedures, involving ‘contractibility’ of sovereign debtor’s payoffs, suspension of convertibility in a ‘discovery’ phase and penalties in case of malfeasance. In relation to the current debate, this is more akin to the IMF’s Sovereign Debt Restructuring Mechanism than the Collective Action Clauses which some promote as an alternative.
|Item Type:||Working or Discussion Paper (Discussion Paper)|
|Subjects:||H Social Sciences > HJ Public Finance|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||International Monetary Fund, Debts, Public, Moral hazard, Debt relief, International economic relations|
|Series Name:||Discussion paper (Centre for Economic Policy Research (Great Britain))|
|Publisher:||Centre for Economic Policy Research (Great Britain)|
|Place of Publication:||London|
|Official Date:||February 2003|
|Number of Pages:||41|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Funder:||Economic and Social Research Council (Great Britain) (ESRC), University of Warwick. Centre for the Study of Globalisation and Regionalisation (CSGR)|
|Grant number:||R000239216 (ESRC)|
bibitem Aghion, Ph., Ph. Bacchetta and A. Banerjee (2000), ‘A Simple Model of
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