Structuring and Restructuring Sovereign Debt: The Role of a Bankruptcy Regime
IMF Working Papers, August 1, 2007
Source details
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- Structuring and Restructuring Sovereign Debt: The Role of a Bankruptcy Regime
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Bibliographic details
- Authors: Patrick Bolton, Olivier D Jeanne
- Published: August 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451867565.001
Summary of core argument
- In an environment characterized by weak contractual enforcement, sovereign lenders can enhance the likelihood of repayment by making their claims more difficult to restructure ex post.
- Competition for repayment among lenders may result in sovereign debt that is excessively difficult to restructure in equilibrium.
- A suitably designed bankruptcy regime that facilitates debt restructuring can alleviate this inefficiency.
Key themes and findings
- Debt structure and enforceability:
- Weak contractual enforcement incentivizes lenders to structure claims to deter ex post restructuring.
- Strategic interaction among creditors:
- Competition for repayment can lead to an equilibrium with debt contracts that are too hard to restructure.
- Role of a bankruptcy regime:
- A bankruptcy regime tailored to sovereign debt can reduce the inefficiency by facilitating restructuring processes.
Subjects and keywords
- Subject: Debt default, Debt restructuring, Financial crises, Public debt, Sovereign debt restructuring
- Keywords: debt structure, short-term debt, WP
Accessibility and related notes
- Publication presented as an IMF Working Paper; contains research in progress intended to elicit comments and further debate.
- Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.
Source: IMF Working Papers landing page for "Structuring and Restructuring Sovereign Debt: The Role of a Bankruptcy Regime".