Sovereign Debt Relief Schemes and Welfare

Aasim Husain

No 1992/025, IMF Working Papers from International Monetary Fund

Abstract: This paper shows that concerted debt reduction may be welfare-improving even when the investment disincentive effect of a debt overhang is not large enough to place the debtor country on the wrong side of the debt Laffer curve. Whether the appropriate relief scheme involves debt reduction or new money, however, depends on whether investment disincentives or liquidity constraints dominate. It is shown that, except under very special circumstances, mixed policy packages involving both debt and liquidity relief may not yield the desired results.

Keywords: WP; debtor country; debt buyback scheme; debt Laffer curve; debtor country government; debt obligation; competitive market debt buyback; disincentive effect; debt claim; debt overhang effect; liquidity effect; Debt reduction; Liquidity; Debt burden; Debt buyback arrangements (search for similar items in EconPapers)
Pages: 20
Date: 1992-03-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=766 (application/pdf)

Related works:
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:imf:imfwpa:1992/025

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().