Debt Maturity and the International Financial Architecture
IMF Working Papers, July 1, 2004
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- Debt Maturity and the International Financial Architecture
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Bibliographic details
- Authors: Olivier D Jeanne
- Published: July 1, 2004
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451855944.001
Summary
- Presents a theory of the maturity of international sovereign debt and derives implications for reforming the international financial architecture.
- Uses a general equilibrium model in which the need to roll over external debt:
- disciplines the policies of debtor countries, and
- makes them vulnerable to unwarranted debt crises owing to bad shocks.
- Provides a welfare analysis of several measures discussed in recent debates:
- adoption of renegotiation-friendly clauses in debt contracts,
- establishment of an international bankruptcy regime for sovereigns.
Model and Key Findings
- Framework: a general equilibrium model focused on rollover risk of external debt.
- Mechanism:
- Rollover requirements create policy discipline for debtor countries.
- Rollover needs also generate vulnerability to unwarranted debt crises triggered by bad shocks.
- Implication: Debt maturity structure is a central determinant of sovereign default risk and crisis propagation.
Welfare Analysis and Policy Recommendations
- Evaluates welfare effects of institutional measures debated for the international financial architecture:
- Renegotiation-friendly clauses in debt contracts.
- An international bankruptcy regime for sovereigns.
- The paper presents comparative welfare implications of these measures within the model (details in the full working paper).
Subjects and Keywords
- Subject: Collective action clauses, Debt default, External debt, Financial crises, Public debt
- Keywords: debtor country, short-term debt, WP
Content based on "Debt Maturity and the International Financial Architecture", IMF Working Papers (2004/137).