Bail out or work out? theoretical considerations
Gregor Irwin and
Economic Journal, 2004, vol. 114, issue 494, C130-C148
This paper assesses various crisis resolution proposals using a theoretical model of liquidity and solvency crisis. The model suggests that payments standstills and last-resort lending are an equally efficient means of dealing with liquidity crises, while coordinated lending through creditor committees is second-best. Debt write-downs are preferred to subsidised IMF financing when dealing with solvency crises, because of the negative moral hazard implications of the latter tool. Finally, the model suggests that international bankruptcy court proposals may be superior to existing contractual approaches in securing such write-downs. Copyright 2004 Royal Economic Society.
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Working Paper: Bail out or work out? Theoretical considerations (2004)
Working Paper: Bail-Out or Work-Out? Theoretical Considerations (2003)
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