EconPapers    
Economics at your fingertips  
 

Deconstructing Delays in Sovereign Debt Restructuring

David Benjamin and Mark Wright ()
Additional contact information
David Benjamin: State University of New York Buffalo

No 753, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: Negotiations to restructure sovereign debt are time consuming, taking almost a decade on average to resolve. In this paper, we analyze a class of widely used complete information models of delays in sovereign debt restructuring and show that, despite superficial similarities, there are major differences across models in the driving force for equilibrium delay, the circumstances in which delay occurs, and the efficiency of the debt restructuring process. We focus on three key assumptions. First, if delay has a permanent effect on economic activity in the defaulting country, equilibrium delay often occurs; this delay can sometimes be socially efficient. Second, prohibiting debt issuance as part of a settlement makes delay less likely to occur in equilibrium. Third, when debt issuance is not fully state contingent, delay can arise because of the risk that the sovereign will default on any debt issued as part of the settlement.

Keywords: Sovereign debt; Sovereign default; Bargaining; Delay (search for similar items in EconPapers)
JEL-codes: C78 F34 H63 (search for similar items in EconPapers)
Date: 2018-07-16
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://minneapolisfed.org/research/wp/wp753.pdf Full text (application/pdf)

Related works:
Journal Article: Deconstructing delays in sovereign debt restructuring (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:753

Ordering information: This working paper can be ordered from
http://www.minneapolisfed.org/pubs/

DOI: 10.21034/wp.753

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Minneapolis Contact information at EDIRC.
Bibliographic data for series maintained by Jannelle Ruswick ().

 
Page updated 2019-07-20
Handle: RePEc:fip:fedmwp:753