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Structuring and restructuring sovereign debt : the role of seniority

Patrick Bolton; Olivier Jeanne

Title:
Structuring and restructuring sovereign debt : the role of seniority
Author(s):
Bolton, Patrick
Jeanne, Olivier
Date:
Type:
Articles
Department:
Business
Permanent URL:
Abstract:
We show how the willingness-to-pay problem and lack of exclusivity in sovereign lending may result in an equilibrium sovereign debt structure that is excessively difficult to restructure. A bankruptcy regime for sovereigns can alleviate this inefficiency but only if it is endowed with far-reaching powers to enforce seniority and subordination clauses in debt contracts. A bankruptcy regime that makes sovereign debt easier to restructure without enforcing seniority may decrease welfare.
Subject(s):
Economics
Item views:
148
Metadata:
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