Structuring and restructuring sovereign debt : the role of a bankruptcy regime

Articles:

Title:: Structuring and restructuring sovereign debt : the role of a bankruptcy regime
Author(s):: Bolton, Patrick
Jeanne, Olivier
Date:: 2007
Type:: Articles
Volume:: 115
Permanent URL:: http://hdl.handle.net/10022/AC:P:9762
Book/Journal Title:: Journal of Political Economy
Media Type:: application/pdf
Abstract:: In an environment characterized by weak contractual enforcement, sovereign lenders can enhance the likelihood of repayment by making their claims more difficult to restructure ex post. We show, however, that competition for repayment between lenders may result in a sovereign debt that is excessively difficult to restructure in equilibrium. This inefficiency may be alleviated by a suitably designed bankruptcy regime that facilitates debt restructuring.
DOI:: http://dx.doi.org/10.1086/528759