Renegotiation, Collective Action Clauses and Sovereign Debt Markets

Federico Weinschelbaum and Jose Wynne
Additional contact information
Jose Wynne: Duke University, Fuqua School of Business

No 75, Working Papers from Universidad de San Andres, Departamento de Economia

Abstract: Collective action clauses (CACs) are provisions specifying that a supermajority of bondholders can change the terms of a bond. We study how CACs determine governments’ fiscal incentives, sovereign bond prices and default probabilities in environments with and without contingent debt and IMF presence. We claim that CACs are likely to be an irrelevant dimension of debt contracts in current sovereign debt markets because of the variety of instruments utilized by sovereigns and the implicit IMF guarantee. Nonetheless, under a new international bankruptcy regime like that recently proposed by the IMF, CACs can increase significantly the cost of borrowing for sovereigns, contrary to what is suggested in previous empirical literature.

Keywords: Sovereign debt; Collective action clauses; Renegotiation; Moral hazard; International bankruptcy court (search for similar items in EconPapers)
JEL-codes: F33 F34 G15 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2004-08, Revised 2004-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://webacademicos.udesa.edu.ar/pub/econ/doc75.pdf First version, 2004 (application/pdf)

Related works:
Journal Article: Renegotiation, collective action clauses and sovereign debt markets (2005)
Working Paper: Renegotiation, Collective Action Clauses and Sovereign Debt Markets (2004)
Working Paper: Renegotiation, Collective Action Clauses and Sovereign Debt Markets (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:sad:wpaper:75

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