Sovereign Debt Repurchases: No Cure for Overhang
Jeremy Bulow and
Kenneth Rogoff ()
The Quarterly Journal of Economics, 1991, vol. 106, issue 4, 1219-1235
Troubled debtor countries do not gain by repurchasing external bank debt at market discount, even if a buyback would stimulate investment by relieving debt overhang. The reason is that buybacks allow creditors to reap more than 100 percent of any efficiency gains that might result from increased investment. We show that open-market buybacks provide a benchmark for evaluating more complex negotiated buyback deals. By comparing any given deal with a hypothetical market buyback of the same size, one can derive upper and lower bounds on the gain to the country. We apply our model to the 1990 Mexican debt deal.
References: Add references at CitEc
Citations View citations in EconPapers (46) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
Working Paper: Sovereign Debt Repurchases: No Cure for Overhang (1989)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:106:y:1991:i:4:p:1219-1235.
Access Statistics for this article
The Quarterly Journal of Economics is currently edited by Robert J. Barro, Elhanan Helpman, Lawrence F. Katz and Andrei Schleifer
More articles in The Quarterly Journal of Economics from Oxford University Press
Bibliographic data for series maintained by Oxford University Press ().