Does strengthening Collective Action Clauses (CACs) help?

Sayantan Ghosal and Kannika Thampanishvong

No 271304, Economic Research Papers from University of Warwick - Department of Economics

Abstract: In a model with both issues of sovereign debtor moral hazard and creditor coordination under incomplete information, we show that the resulting conáict between ex ante and interim e¢ ciency limits the welfare impact of strengthening CACs. Conditional on default, we show that an interim e¢ cient CAC threshold exists and improving creditor coordination results in welfare gains. However, when ex ante e¢ - ciency requires the sovereign debtor to choose actions that reduce the probability of default, improved creditor coordination reduces ex ante e¢ ciency and the interim effcient CAC threshold is higher than the ex ante efficient CAC threshold.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 22
Date: 2009-03-10
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Does strengthening Collective Action Clauses (CACs) help? (2013)
Working Paper: Does strengthening Collective Action Clauses (CACs) help? (2010)
Working Paper: Does strengthening Collective Action Clauses (CACs) help? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:271304

DOI: 10.22004/ag.econ.271304

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