Download or read book Trade Costs of Sovereign Debt Restructurings written by Mr.Tamon Asonuma and published by International Monetary Fund. This book was released on 2016-11-15 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: Sovereign debt restructurings have been shown to influence the dynamics of imports and exports. This paper shows that the impact can vary substantially depending on whether the restructuring takes place preemptively without missing payments to creditors, or whether it takes place after a default has occurred. We document that countries with post-default restructurings experience on average: (i) a more severe and protracted decline in imports, (ii) a larger fall in exports, and (iii) a sharper and more prolonged decline in both GDP, investment and real exchange rate than preemptive cases. These stylized facts are confirmed by panel regressions and local projection estimates, and a range of robustness checks including for the endogeneity of the restructuring strategy. Our findings suggest that a country’s choice of how to go about restructuring its debt can have major implications for the costs it incurs from restructuring.
Download or read book Costs of Sovereign Defaults Restructuring Strategies Bank Distress and the Capital Inflow Credit Channel written by Mr.Tamon Asonuma and published by International Monetary Fund. This book was released on 2019-03-25 with total page 91 pages. Available in PDF, EPUB and Kindle. Book excerpt: Sovereign debt restructurings are associated with declines in GDP, investment, bank credit, and capital flows. The transmission channels and associated output and banking sector costs depend on whether the restructuring takes place preemptively, without missing payments to creditors, or whether it takes place after a default has occurred. Post-default restructurings are associated with larger declines in bank credit, an increase in lending interest rates, and a higher likelihood of triggering a banking crisis than pre-emptive restructurings. Our local projection estimates show large declines in GDP, investment, and credit amplified by severe sudden stops and transmitted through a “capital inflow-credit channel”.
Download or read book Sovereign Debt Restructurings 1950 2010 written by Mr.Udaibir S. Das and published by International Monetary Fund. This book was released on 2012-08-01 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a comprehensive survey of pertinent issues on sovereign debt restructurings, based on a newly constructed database. This is the first complete dataset of sovereign restructuring cases, covering the six decades from 1950–2010; it includes 186 debt exchanges with foreign banks and bondholders, and 447 bilateral debt agreements with the Paris Club. We present new stylized facts on the outcome and process of debt restructurings, including on the size of haircuts, creditor participation, and legal aspects. In addition, the paper summarizes the relevant empirical literature, analyzes recent restructuring episodes, and discusses ongoing debates on crisis resolution mechanisms, credit default swaps, and the role of collective action clauses.
Download or read book Sovereign Debt Restructuring and Growth written by Lorenzo Forni and published by International Monetary Fund. This book was released on 2016-07-22 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the effect of sovereign debt restructurings with external private creditors on growth during the period 1970-2010. We find that there are bad and good (or not so bad) debt restructurings for growth. While growth generally declines in the aftermath of a sovereign debt restructuring, agreements that allow countries to exit a default spell (final restructurings) are associated with improving growth. The impact can be significant. In general, three years after restructuring, growth is about 5 percent lower compared to countries that did not face restructuring over the same period. The exception is for final restructurings, which result in positive growth in the years immediately after the restructuring. Final restructurings tend to be better for growth because they reduce countries’ debt, with the strongest effect for countries that exit restructurings with relatively low debt levels.
Download or read book Considerations in the Choice of the Appropriate Discount Rate for Evaluating Sovereign Debt Restructurings written by Ms.Julie Kozack and published by International Monetary Fund. This book was released on 2005-12-01 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Assessments regarding the effectiveness of sovereign debt restructurings are often summarized by comparisons of the net present value of debt service before and after the restructuring. These calculations are inherently sensitive to the choice of discount rate. This paper explores issues that arise in selecting discount rates when evaluating sovereign debt restructurings. It suggests using a range of discount rates and centering the analysis around the internal rate of return to assess whether the debt restructuring has generated net present value savings or costs to the debtor.
Download or read book Trade Costs of Sovereign Debt Restructurings written by Mr.Tamon Asonuma and published by International Monetary Fund. This book was released on 2016-11-15 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: Sovereign debt restructurings have been shown to influence the dynamics of imports and exports. This paper shows that the impact can vary substantially depending on whether the restructuring takes place preemptively without missing payments to creditors, or whether it takes place after a default has occurred. We document that countries with post-default restructurings experience on average: (i) a more severe and protracted decline in imports, (ii) a larger fall in exports, and (iii) a sharper and more prolonged decline in both GDP, investment and real exchange rate than preemptive cases. These stylized facts are confirmed by panel regressions and local projection estimates, and a range of robustness checks including for the endogeneity of the restructuring strategy. Our findings suggest that a country’s choice of how to go about restructuring its debt can have major implications for the costs it incurs from restructuring.
Download or read book Sovereign Debt written by Mr. Leonardo Martinez and published by International Monetary Fund. This book was released on 2022-06-17 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper surveys the literature on sovereign debt from the perspective of understanding how sovereign debt differs from privately issue debt, and why sovereign debt is deemed safe in some countries but risky in others. The answers relate to the unique power of the sovereign. One the one hand, a sovereign has the power to tax, making debt relatively safe; on the other, it also has control over its territory and most of its assets, making debt enforcement difficult. The paper discusses debt contracts and the sovereign debt market, sovereign debt restructurings, and the empirical and theoretical literatures on the costs and causes of defaults. It describes the adverse impact of sovereign default risk on the issuing countries and what explains this impact. The survey concludes with a discussion of policy options to reduce sovereign risk, including fiscal frameworks that act as commitment devices, state-contingent debt, and independent and credible monetary policy.
Download or read book The Cost of Default written by Silvia Marchesi and published by . This book was released on 2015 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the relationship between sovereign debt default and (short term) GDP growth taking into account the depth of a debt restructuring and distinguishing between commercial and official sovereign debt restructurings. Analyzing default episodes in 117 countries over the period 1975-2013, I find that, in the short term, defaults are correlated with significant contraction of output growth. Moreover, by controlling for both the occurrence and the magnitude of private and official defaults, I am able to detect a more lasting and negative link between default and growth (which eventually turns out to be positive but only for haircuts). In both cases I find evidence of a trade-off concerning the restructurings size. Higher haircuts, however, may have some benefits in the short-run, but in turn imply a negative stigma which lower growth over a longer period. Conversely, higher amount of official restructuring may have some costs in the short-run, but are associated to an increase in growth in the long run. Adopting an alternative specification, in which the dependent variable is a country's credit rating, I investigate whether variation in the borrowing costs (highly correlated with credit ratings) may be one of the channels behind the link between restructuring and growth. I find that, in the case of haircuts, an improvement in the borrowing conditions a few years after the restructuring may explain a growth recovery. For official restructurings the evidence is more mixed.
Download or read book Sovereign Debt written by Rob Quail and published by John Wiley & Sons. This book was released on 2011-02-25 with total page 435 pages. Available in PDF, EPUB and Kindle. Book excerpt: An intelligent analysis of the dangers, opportunities, and consequences of global sovereign debt Sovereign debt is growing internationally at a terrifying rate, as nations seek to prop up their collapsing economies. One only needs to look at the sovereign risk pressures faced by Greece, Spain, and Ireland to get an idea of how big this problem has become. Understanding this dilemma is now more important than ever, that's why Robert Kolb has compiled Sovereign Debt. With this book as your guide, you'll gain a better perspective on the essential issues surrounding sovereign debt and default through discussions of national defaults, systemic risk, associated costs, and much more. Historical studies are also included to provide a realistic framework of reference. Contains up-to-date research and analysis on sovereign debt from today's leading practitioners and academics Details the dangers of defaults and their associated systemic risks Explores the past, present, and future of sovereign debt The repercussions of a national default are all-encompassing as global markets are intricately interwoven in the modern world. Sovereign Debt examines what it will take to overcome the challenges of this market and how you can deal with the uncertainty surrounding it.
Download or read book Serial Sovereign Defaults and Debt Restructurings written by Mr.Tamon Asonuma and published by International Monetary Fund. This book was released on 2016-03-16 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Emerging countries that have defaulted on their debt repayment obligations in the past are more likely to default again in the future than are non-defaulters even with the same external debt-to-GDP ratio. These countries actually have repeated defaults or restructurings in short periods. This paper explains these stylized facts within a dynamic stochastic general equilibrium framework by explicitly modeling renegotiations between a defaulting country and its creditors. The quantitative analysis of the model reveals that the equilibrium probability of default for a given debt-to-GDP level is weakly increasing with the number of past defaults. The model also accords with an additional fact: lower recovery rates (high NPV haircuts) are associated with increases in spreads at renegotiation.
Download or read book Sovereign Debt written by S. Ali Abbas and published by Oxford University Press, USA. This book was released on 2019 with total page 455 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is an attempt to build some structure around the issues of sovereign debt to help guide economists, practitioners, and policymakers through this complicated, but not intractable, subject.
Download or read book The Costs of Sovereign Default written by Eduardo Borensztein and published by . This book was released on 2008 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper evaluates empirically four types of cost that may result from an international sovereign default: reputational costs, international trade exclusion costs, costs to the domestic economy through the financial system, and political costs to the authorities. It finds that the economic costs are generally significant but short-lived, and sometimes do not operate through conventional channels. The political consequences of a debt crisis, by contrast, seem to be particularly dire for incumbent governments and finance ministers, broadly in line with what happens in currency crises.
Download or read book Structuring and Restructuring Sovereign Debt written by Mr.Patrick Bolton and published by International Monetary Fund. This book was released on 2007-08-01 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Costs of Sovereign Defaults Restructuring Strategies and Financial Intermediation written by Tamon Asonuma and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Sovereign debt restructurings are associated with declines in the growth of GDP, investment, bank credit to the private sector and capital flow. Our empirical findings show that the intensity of these losses depends on two aspects: whether the restructuring preempts a default and the extent of the country's reliance on bank intermediation. Post-default restructurings are associated with worse outcomes than restructurings that take place preemptively without payments and going into default. Much of that difference is driven by the adverse effects following all restructuring strategies in countries with relatively large banking sectors, while the largest losses in post-default episodes.
Download or read book Sovereign Debt Restructuring Recent Developments and Implications for the Fund s Legal and Policy Framework written by International Monetary Fund. Asia and Pacific Dept and published by International Monetary Fund. This book was released on 2013-04-26 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: his paper reviews the recent application of the Fund’s policies and practices on sovereign debt restructuring. Specifically, the paper: • recaps in a holistic manner the various policies and practices that underpin the Fund's legal and policy framework for sovereign debt restructuring, including on debt sustainability, market access, financing assurances, arrears, private sector involvement (PSI), official sector involvement (OSI), and the use of legal instruments; • reviews how this framework has been applied in the context of Fund-supported programs and highlights the issues that have emerged in light of recent experience with debt restructuring; and • describes recent initiatives in various fora aimed at promoting orderly sovereign debt restructuring, highlighting differences with the Fund’s existing framework. Based on this stocktaking, the paper identifies issues that could be considered in further depth in follow-up work by staff to assess whether the Fund’s framework for debt restructuring should be adapted: • first, debt restructurings have often been too little and too late, thus failing to re-establish debt sustainability and market access in a durable way. Overcoming these problems likely requires action on several fronts, including (i) increased rigor and transparency of debt sustainability and market access assessments, (ii) exploring ways to prevent the use of Fund resources to simply bail out private creditors, and (iii) measures to alleviate the costs associated with restructurings; • second, while creditor participation has been adequate in recent restructurings, the current contractual, market-based approach to debt restructuring is becoming less potent in overcoming collective action problems, especially in pre-default cases. In response, consideration could be given to making the contractual framework more effective, including through the introduction of more robust aggregation clauses into international sovereign bonds bearing in mind the inter-creditor equity issues that such an approach may raise. The Fund may also consider ways to condition use of its financing more tightly to the resolution of collective action problems; • third, the growing role and changing composition of official lending call for a clearer framework for official sector involvement, especially with regard to non-Paris Club creditors, for which the modality for securing program financing commitments could be tightened; and • fourth, although the collaborative, good-faith approach to resolving external private arrears embedded in the lending into arrears (LIA) policy remains the most promising way to regain market access post-default, a review of the effectiveness of the LIA policy is in order in light of recent experience and the increased complexity of the creditor base. Consideration could also be given to extending the LIA policy to official arrears.
Download or read book The Cost of Aggressive Sovereign Debt Policies written by Christoph Trebesch and published by International Monetary Fund. This book was released on 2009-02-01 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes a new empirical measure of cooperative versus conflictual crisis resolution following sovereign default and debt distress. The index of government coerciveness is presented as a proxy for excusable versus inexcusable default behaviour and used to evaluate the costs of default for the domestic private sector, in particular its access to international debt markets. Our findings indicate that unilateral, aggressive sovereign debt policies lead to a strong decline in corporate access to external finance (loans and bond issuance). We conclude that coercive government actions towards external creditors can have strong signalling effects with negative spillovers on domestic firms. "Good faith" debt renegotiations may be crucial to minimize the domestic costs of sovereign defaults.
Download or read book Improving Sovereign Debt Restructurings written by Maximiliano A. Dvorkin and published by . This book was released on 2022 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: The wave of sovereign defaults in the early 1980s and the string of debt crises in subsequent decades have fostered proposals involving policy interventions in sovereign debt restructurings. The global financial crisis and the recent global pandemic have further reignited this discussion among academics and policymakers. A key question about these policy proposals for debt restructurings that has proved hard to handle is how they influence the behavior of creditors and debtors. We address this challenge by evaluating policy proposals in a quantitative sovereign default model that incorporates two essential features of debt: maturity choice and debt renegotiation in default. We find, first, that a rule that tilts the distribution of creditor losses during restructurings toward holders of long-maturity bonds reduces short-term yield spreads, lowering the probability of a sovereign default by 25 percent. Second, issuing GDP-indexed bonds exclusively during restructurings also reduces the probability of default, especially of defaults in the five years following a debt restructuring. The policies lead to welfare improvements and reductions in haircuts of similar magnitude when implemented separately. When jointly implemented, they reinforce each other's welfare gains, suggesting good complementarity.
