Orderly Sovereign Debt Restructuring : Missing in Action! (And Likely To Remain So)
An orderly sovereign debt restructuring should place the debtor nation's public debt on a sustainable trajectory while minimizing procrastination and contagion. However, the experiences with the debt crisis of the 1980s, Russia 1998, Argentina 2001, and Greece 2010 indicate that orderly debt restructurings remain elusive, even with high-powered official intervention. When solvency problems are present, the chances of success increase if official money is lent at the risk-free rate, reflecting its low risk, and if private creditors receive an upfront haircut. The paper examines the obstacles, which include moral hazard, difficulty in distinguishing between solvency and liquidity crises, and the “political economy” resistance to upfront haircuts. Orderly sovereign debt restructurings are likely to remain elusive notwithstanding recent evidence that the official mindset may be changing.
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Format: | Journal Article biblioteca |
Language: | en_US |
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Oxford University Press on behalf of the World Bank
2014-01-24
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Subjects: | bailout, bond, central bank, debt crisis, debtor, emerging market, emerging market countries, international bank, liquidity, moral hazard, political economy, private creditor, public debt, solvency, sovereign debt, sovereign debt restructuring, |
Online Access: | http://hdl.handle.net/10986/22566 |
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dig-okr-10986225662021-04-23T14:04:09Z Orderly Sovereign Debt Restructuring : Missing in Action! (And Likely To Remain So) Canuto, Otaviano Pinto, Brian Prasad, Mona bailout bond central bank debt crisis debtor emerging market emerging market countries emerging market international bank liquidity moral hazard political economy private creditor public debt solvency sovereign debt sovereign debt restructuring An orderly sovereign debt restructuring should place the debtor nation's public debt on a sustainable trajectory while minimizing procrastination and contagion. However, the experiences with the debt crisis of the 1980s, Russia 1998, Argentina 2001, and Greece 2010 indicate that orderly debt restructurings remain elusive, even with high-powered official intervention. When solvency problems are present, the chances of success increase if official money is lent at the risk-free rate, reflecting its low risk, and if private creditors receive an upfront haircut. The paper examines the obstacles, which include moral hazard, difficulty in distinguishing between solvency and liquidity crises, and the “political economy” resistance to upfront haircuts. Orderly sovereign debt restructurings are likely to remain elusive notwithstanding recent evidence that the official mindset may be changing. 2015-08-28T20:44:34Z 2015-08-28T20:44:34Z 2014-01-24 Journal Article World Bank Research Observer 1564-6971 http://hdl.handle.net/10986/22566 en_US CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ World Bank Oxford University Press on behalf of the World Bank Publications & Research Publications & Research :: Journal Article Latin America Argentina Greece Russian Federation |
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bailout bond central bank debt crisis debtor emerging market emerging market countries emerging market international bank liquidity moral hazard political economy private creditor public debt solvency sovereign debt sovereign debt restructuring bailout bond central bank debt crisis debtor emerging market emerging market countries emerging market international bank liquidity moral hazard political economy private creditor public debt solvency sovereign debt sovereign debt restructuring |
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bailout bond central bank debt crisis debtor emerging market emerging market countries emerging market international bank liquidity moral hazard political economy private creditor public debt solvency sovereign debt sovereign debt restructuring bailout bond central bank debt crisis debtor emerging market emerging market countries emerging market international bank liquidity moral hazard political economy private creditor public debt solvency sovereign debt sovereign debt restructuring Canuto, Otaviano Pinto, Brian Prasad, Mona Orderly Sovereign Debt Restructuring : Missing in Action! (And Likely To Remain So) |
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An orderly sovereign debt restructuring should place the debtor nation's public debt on a sustainable trajectory while minimizing procrastination and contagion. However, the experiences with the debt crisis of the 1980s, Russia 1998, Argentina 2001, and Greece 2010 indicate that orderly debt restructurings remain elusive, even with high-powered official intervention. When solvency problems are present, the chances of success increase if official money is lent at the risk-free rate, reflecting its low risk, and if private creditors receive an upfront haircut. The paper examines the obstacles, which include moral hazard, difficulty in distinguishing between solvency and liquidity crises, and the “political economy” resistance to upfront haircuts. Orderly sovereign debt restructurings are likely to remain elusive notwithstanding recent evidence that the official mindset may be changing. |
format |
Journal Article |
topic_facet |
bailout bond central bank debt crisis debtor emerging market emerging market countries emerging market international bank liquidity moral hazard political economy private creditor public debt solvency sovereign debt sovereign debt restructuring |
author |
Canuto, Otaviano Pinto, Brian Prasad, Mona |
author_facet |
Canuto, Otaviano Pinto, Brian Prasad, Mona |
author_sort |
Canuto, Otaviano |
title |
Orderly Sovereign Debt Restructuring : Missing in Action! (And Likely To Remain So) |
title_short |
Orderly Sovereign Debt Restructuring : Missing in Action! (And Likely To Remain So) |
title_full |
Orderly Sovereign Debt Restructuring : Missing in Action! (And Likely To Remain So) |
title_fullStr |
Orderly Sovereign Debt Restructuring : Missing in Action! (And Likely To Remain So) |
title_full_unstemmed |
Orderly Sovereign Debt Restructuring : Missing in Action! (And Likely To Remain So) |
title_sort |
orderly sovereign debt restructuring : missing in action! (and likely to remain so) |
publisher |
Oxford University Press on behalf of the World Bank |
publishDate |
2014-01-24 |
url |
http://hdl.handle.net/10986/22566 |
work_keys_str_mv |
AT canutootaviano orderlysovereigndebtrestructuringmissinginactionandlikelytoremainso AT pintobrian orderlysovereigndebtrestructuringmissinginactionandlikelytoremainso AT prasadmona orderlysovereigndebtrestructuringmissinginactionandlikelytoremainso |
_version_ |
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