Sovereign Default, Private Sector Creditors and the IFIs

March 1, 2009

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Format: Chicago

Emine Boz. Sovereign Default, Private Sector Creditors and the IFIs, (USA: International Monetary Fund, 2009) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper builds a model of a sovereign borrower that has access to credit from private sector creditors and an IFI. Private sector creditors and the IFI offer different debt contracts that are modelled based on the institutional frameworks of these two types of debt. We analyze the decisions of a sovereign on how to allocate its borrowing needs between these two types of creditors, and when to default on its debt to the private sector creditor. The numerical analysis shows that, consistent with the data; the model predicts countercyclical IFI debt along with procyclical commercial debt flows, also matching other features of the data such as frequency of IFI borrowing and mean IFI debt stock.

Subject: Credit, Debt default, Emerging and frontier financial markets, External debt, Financial institutions, Financial markets, Multilateral development institutions, National accounts, Private debt, Public debt

Keywords: Debt default, Debt flow, Default probability, Emerging and frontier financial markets, Emerging markets, Global, IFI debt, IFIs, IMF debt, IMF lending, Multilateral development institutions, Price schedule, Private debt, Sovereign debt and default, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/046
Stock No:

WPIEA2009046
ISBN:

9781451871944
ISSN:

1018-5941

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