Avenues for the reduction of LDC-debt: An institutional analysis
Günter Franke ()
No 100, Discussion Papers, Series II from University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy"
This paper compares different instruments for a debt relief, given severe debt servicing problems of some sovereign debtors. Criteria for a debt relief are discussed. First, it will be argued that a debt relief cannot be supported by the argument that it benefits both, the debtor and the creditors. Second, debt reliefs have no chance to be realized if they are a "free lunch" to the debtor. Some cost has to be borne by the debtor. Third, if the debtor is actively involved in the debt relief, then the creditors will make sure by appropriate instruments that the debtor cannot raise the wealth transfer ex post to his benefit at the creditors' expense. Fourth, debt reliefs with deterministic claim reductions are inefficient. Contingent claim reductions involve smaller wealth transfers. If these reductions are made dependent on observable commodity prices, then state verification costs can be avoided and the creditors may hedge the price risk.
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:kondp2:100
Access Statistics for this paper
More papers in Discussion Papers, Series II from University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy" Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().