Structuring and Restructuring Sovereign Debt: The Role of a Bankruptcy Regime

Author/Editor:

Patrick Bolton ; Olivier D Jeanne

Publication Date:

August 1, 2007

Electronic Access:

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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:

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. We show however, that competition for repayment among lenders may result in a sovereign debt that is excessively difficult to restructure in equilibrium. This inefficiency may be alleviated by a suitably designed bankruptcy regime that facilitates debt restructuring.

Series:

Working Paper No. 2007/192

Subject:

Debt default Debt restructuring Financial crises Public debt Sovereign debt restructuring

English

Publication Date:

August 1, 2007

ISBN/ISSN:

9781451867565/1018-5941

Stock No:

WPIEA2007192

Pages:

27

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