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Recent experience with commercial bank debt r eduction

Stijn Claessens (stijn.claessens@yale.edu), Ishac Diwan (ishacd1@gmail.com) and Fernandez-

No 995, Policy Research Working Paper Series from The World Bank

Abstract: The authors review the case for market-based debt reduction and concerted debt reduction. They explain the new menu-based approach to debt reduction and discuss why it may be preferred to market-based and concerted debt reduction. In a review of the five recent debt-reduction agreements, they find that the menu approach indeed achieved debt reduction at substantially lower costs than a comparable market-based operation. By one measure, the five countries may have saved more than $8 billion. Even a menu-based approach to debt reduction, however, is unlikely to directly benefit the debtor financially. They find that the debtors suffered financial losses equal to a few percent of their GDPs. Indirect benefits, or efficiency gains associated with debt reduction, are necessary to make the operation benefit the debtor.

Keywords: Debt Relief and HIPC; Human Rights; Banks & Banking Reform; Capital Markets and Capital Flows; Capital Flows; External Debt; International Trade and Trade Rules; Debt Markets (search for similar items in EconPapers)
Date: 1992-10-31
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Citations: View citations in EconPapers (14)

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