Sovereign debt workouts with the IMF as delegated monitor - a common agency approach

Prasanna Gai and Nicholas Vause

Bank of England working papers from Bank of England

Abstract: IMF programmes are frequently criticised for lacking focus and being ineffective in helping maintain private credit lines following a debt crisis. A theoretical model is developed to explore the interlinkages between result-based conditionality and creditor collective action problems. The strategic interactions between official and private creditors are highlighted, and some of the trade-offs that underpin the design of IMF programmes are clarified. Conditions under which official creditors are able to limit the efficiency losses generated by creditor non-cooperation and debtor moral hazard are identified. The circumstances under which official lending is able to catalyse private sector finance are also analysed.

Date: 2003-05
New Economics Papers: this item is included in nep-lam, nep-mac and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:187

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