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Bargaining and sustainability: the Argentine debt swap of 2005

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Dhillon, Amrita, García Fronti, Javier I., Ghosal, Sayantan and Miller, Marcus (2006) Bargaining and sustainability: the Argentine debt swap of 2005. Working Paper. Coventry: University of Warwick. Centre for the Study of Globalisation and Regionalisation. Working papers (University of Warwick. Centre for the Study of Globalisation and Regionalisation) (No.189).

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Abstract

When Argentine sovereign default in December 2001 led to a collapse of the peso, the burden of dollar debt became demonstrably unsustainable. But it was not clear what restructuring was feasible, nor when. Eventually, in 2005 after a delay of more than three years, a supermajority of creditors accepted a swap implying a recovery rate of around 37 cents in the dollar. In this paper a bargaining approach is used to explain both the settlement and the delay. We conclude that the agreed swap broadly corresponds to a bargaining outcome where the Argentine government had “first mover” advantage: and that substantial delay occurred as negotiators seeking a sustainable settlement waited for economic recovery. Factors not explicit in the formal framework are also considered -- heterogeneity of creditors, for example, and the role of third parties in promoting “good faith” bargaining.

Item Type:

Working or Discussion Paper (Working Paper)

Subjects:

H Social Sciences > HJ Public Finance

Divisions:

Faculty of Social Sciences > Economics
Faculty of Social Sciences > Centre for the Study of Globalisation and Regionalisation

Library of Congress Subject Headings (LCSH):

Debt relief -- Argentina, Debts, Public -- Argentina, Sustainable development -- Argentina, Argentina -- Politics and government, Argentina -- Economic conditions -- 1983-

Series Name:

Working papers (University of Warwick. Centre for the Study of Globalisation and Regionalisation)

Publisher:

University of Warwick. Centre for the Study of Globalisation and Regionalisation

Place of Publication:

Coventry

Official Date:

January 2006

Dates:

Date	Event
January 2006	Published

Number:

No.189

Number of Pages:

Status:

Not Peer Reviewed

Access rights to Published version:

Open Access

Funder:

Economic and Social Research Council (Great Britain) (ESRC)

Grant number:

RES-051-27-0125 (ESRC)

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