Orderly Sovereign Debt Restructuring : Missing in Action!

This paper takes a hard look at the experience with official intervention in sovereign debt crises, focusing on debt crises of the 1980s, Russia in 1998, Argentina in 2001, and Greece in 2010. Based on the track record, the authors argue that in situations where countries face a solvency problem, of...

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Main Authors:	Canuto, Otaviano, Pinto, Brian, Prasad, Mona
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING ADJUSTMENT LOANS ARBITRAGE ASSET CLASS ASSET PRICES BAILOUT BAILOUTS BALANCE SHEETS BANK LOANS BANK POLICY BANKING SECTOR BANKING SYSTEM BANKRUPTCIES BANKRUPTCY BANKRUPTCY MECHANISM BANKRUPTCY PROCEDURE BANKRUPTCY PROCESS BASIS POINTS BLACK MARKET BLACK MARKETS BOND BOND HOLDERS BOND ISSUE BOND ISSUES BOND SPREADS BONDHOLDERS BONDS BORROWING COST BORROWING COSTS BUDGET CONSTRAINT BUDGET CONSTRAINTS BUDGET SURPLUSES CAPITAL ACCOUNTS CAPITAL ADEQUACY CAPITAL MOBILITY CATALYTIC FINANCE CENTRAL BANK CENTRAL BANKS CODE OF CONDUCT COLLECTIVE ACTION COLLECTIVE ACTION CLAUSES COLLECTIVE ACTION PROBLEM COMMERCIAL BANK COMMERCIAL BANK LOANS COMMERCIAL BANKS CONTINGENT LIABILITIES CORPORATE TAX RATE COUNTRY DEBT CREDIBILITY CREDIT STANDING CREDITOR CREDITOR COORDINATION CREDITWORTHINESS CURRENCY CURRENCY BOARD CURRENCY CRISES CURRENCY CRISIS CURRENCY MISMATCHES CURRENT ACCOUNT SURPLUSES DEBT BURDEN DEBT CRISES DEBT CRISIS DEBT DEFAULT DEBT DEFAULTS DEBT EXCHANGE DEBT INSTRUMENTS DEBT OBLIGATIONS DEBT OUTSTANDING DEBT OVERHANG DEBT POLICY DEBT PROBLEM DEBT PROBLEMS DEBT REDUCTION DEBT RELIEF DEBT SERVICE DEBT SERVICE PAYMENTS DEBT SWAP DEBT SWAPS DEBTOR DEBTOR COUNTRIES DEBTOR COUNTRY DEBTORS DEFAULT RISK DEPOSIT DEVALUATION DEVELOPING COUNTRIES DEVELOPING COUNTRY DOLLAR DEBT DOMESTIC BANKS ECONOMIC POLICIES EMERGING MARKET EMERGING MARKET COUNTRIES EMERGING MARKETS EUROBOND EVENT OF INSOLVENCY EXCHANGE RATE EXTERNAL BORROWING EXTERNAL DEBT EXTERNAL DEBTS FACE VALUE FEDERAL DEPOSIT INSURANCE FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL STABILITY FINANCIAL SUPPORT FINANCIAL SYSTEM FISCAL DEFICIT FISCAL DEFICITS FIXED EXCHANGE RATE FIXED EXCHANGE RATES FIXED INCOME FLEXIBLE EXCHANGE RATES FLOATING RATE FLOATING RATE DEBTS FOREIGN BANKS FOREIGN EXCHANGE FOREIGN EXCHANGE RESERVE FOREIGN EXCHANGE RESERVES FREE RIDER PROBLEMS GLOBAL DEVELOPMENT FINANCE GLOBAL FINANCIAL STABILITY GLOBALIZATION GOVERNMENT BONDS GOVERNMENT DEBT HEDGE FUND HOLDING HOLDINGS HOME CURRENCIES INDEBTED INDEBTED POOR COUNTRIES INDIVIDUAL CREDITORS INFLATION INSOLVENCY SITUATION INSTITUTIONAL ARRANGEMENT INSURANCE INSURANCE CORPORATION INTEREST BURDEN INTEREST DIFFERENTIAL INTEREST PAYMENTS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANKRUPTCY INTERNATIONAL BOND INTERNATIONAL BOND MARKETS INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL MARKETS INTERNATIONAL ECONOMICS INTERNATIONAL LAW INVESTMENT BANKS LEGAL IMPEDIMENTS LENDER LENDER OF LAST RESORT LENDING DECISIONS LEVY LIQUIDITY LIQUIDITY PROBLEM LOAN LOCAL CURRENCY LONG BOND LONG TERM CAPITAL MACROECONOMIC CRISES MACROECONOMIC INSTABILITY MACROECONOMIC UNCERTAINTY MACROECONOMIC VOLATILITY MARKET ACCESS MARKET INDEX MARKET VALUE MATURITY MONETARY FINANCING MONETARY FUND MORAL HAZARD PAYMENT TERMS POLITICAL ECONOMY POLITICAL RISK PORTFOLIOS PRIVATE CAPITAL PRIVATE CREDITORS PRIVATE DEBT PRIVATE DEBTS PRIVATE INVESTMENT PRIVATE INVESTORS PRIVATE LENDERS PRIVATE LOANS PRIVATE] INVESTORS PRIVATIZATION PROBABILITY OF DEFAULT PUBLIC DEBT PUBLIC FINANCES PUBLIC INVESTMENTS PUBLIC SECTOR DEBT REAL EXCHANGE RATES REMAINING DEBT RENEGOTIATION RENEGOTIATIONS RESERVES RETURN RISK-FREE RATE RISKY ASSET SECONDARY MARKET SECONDARY MARKET PRICES SOLVENCY SOLVENCY PROBLEM SOVEREIGN BONDS SOVEREIGN DEBT SOVEREIGN DEBT MARKETS SOVEREIGN DEBT RESTRUCTURING SOVEREIGN DEBT RESTRUCTURING MECHANISM SOVEREIGN DEFAULTS SOVEREIGN LENDING SOVEREIGN RISK SOVEREIGN YIELD SWAP SWAPS T-BILL T-BILLS TAX TAX COLLECTIONS TOTAL DEBT TRADING TRANCHES TRANSACTIONS COSTS TREASURY TREASURY BILLS WAGES
Online Access:	http://documents.worldbank.org/curated/en/2012/05/16251472/orderly-sovereign-debt-restructuring-missing-action http://hdl.handle.net/10986/9363

id	okr-10986-9363
recordtype	oai_dc
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCOUNTING ADJUSTMENT LOANS ARBITRAGE ASSET CLASS ASSET PRICES BAILOUT BAILOUTS BALANCE SHEETS BANK LOANS BANK POLICY BANKING SECTOR BANKING SYSTEM BANKRUPTCIES BANKRUPTCY BANKRUPTCY MECHANISM BANKRUPTCY PROCEDURE BANKRUPTCY PROCESS BASIS POINTS BLACK MARKET BLACK MARKETS BOND BOND HOLDERS BOND ISSUE BOND ISSUES BOND SPREADS BONDHOLDERS BONDS BORROWING COST BORROWING COSTS BUDGET CONSTRAINT BUDGET CONSTRAINTS BUDGET SURPLUSES CAPITAL ACCOUNTS CAPITAL ADEQUACY CAPITAL MOBILITY CATALYTIC FINANCE CENTRAL BANK CENTRAL BANKS CODE OF CONDUCT COLLECTIVE ACTION COLLECTIVE ACTION CLAUSES COLLECTIVE ACTION PROBLEM COMMERCIAL BANK COMMERCIAL BANK LOANS COMMERCIAL BANKS CONTINGENT LIABILITIES CORPORATE TAX RATE COUNTRY DEBT CREDIBILITY CREDIT STANDING CREDITOR CREDITOR COORDINATION CREDITWORTHINESS CURRENCY CURRENCY BOARD CURRENCY CRISES CURRENCY CRISIS CURRENCY MISMATCHES CURRENT ACCOUNT SURPLUSES DEBT BURDEN DEBT CRISES DEBT CRISIS DEBT DEFAULT DEBT DEFAULTS DEBT EXCHANGE DEBT INSTRUMENTS DEBT OBLIGATIONS DEBT OUTSTANDING DEBT OVERHANG DEBT POLICY DEBT PROBLEM DEBT PROBLEMS DEBT REDUCTION DEBT RELIEF DEBT SERVICE DEBT SERVICE PAYMENTS DEBT SWAP DEBT SWAPS DEBTOR DEBTOR COUNTRIES DEBTOR COUNTRY DEBTORS DEFAULT RISK DEPOSIT DEVALUATION DEVELOPING COUNTRIES DEVELOPING COUNTRY DOLLAR DEBT DOMESTIC BANKS ECONOMIC POLICIES EMERGING MARKET EMERGING MARKET COUNTRIES EMERGING MARKETS EUROBOND EVENT OF INSOLVENCY EXCHANGE RATE EXTERNAL BORROWING EXTERNAL DEBT EXTERNAL DEBTS FACE VALUE FEDERAL DEPOSIT INSURANCE FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL STABILITY FINANCIAL SUPPORT FINANCIAL SYSTEM FISCAL DEFICIT FISCAL DEFICITS FIXED EXCHANGE RATE FIXED EXCHANGE RATES FIXED INCOME FLEXIBLE EXCHANGE RATES FLOATING RATE FLOATING RATE DEBTS FOREIGN BANKS FOREIGN EXCHANGE FOREIGN EXCHANGE RESERVE FOREIGN EXCHANGE RESERVES FREE RIDER PROBLEMS GLOBAL DEVELOPMENT FINANCE GLOBAL FINANCIAL STABILITY GLOBALIZATION GOVERNMENT BONDS GOVERNMENT DEBT HEDGE FUND HOLDING HOLDINGS HOME CURRENCIES INDEBTED INDEBTED POOR COUNTRIES INDIVIDUAL CREDITORS INFLATION INSOLVENCY SITUATION INSTITUTIONAL ARRANGEMENT INSURANCE INSURANCE CORPORATION INTEREST BURDEN INTEREST DIFFERENTIAL INTEREST PAYMENTS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANKRUPTCY INTERNATIONAL BOND INTERNATIONAL BOND MARKETS INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL MARKETS INTERNATIONAL ECONOMICS INTERNATIONAL LAW INVESTMENT BANKS LEGAL IMPEDIMENTS LENDER LENDER OF LAST RESORT LENDING DECISIONS LEVY LIQUIDITY LIQUIDITY PROBLEM LOAN LOCAL CURRENCY LONG BOND LONG TERM CAPITAL MACROECONOMIC CRISES MACROECONOMIC INSTABILITY MACROECONOMIC UNCERTAINTY MACROECONOMIC VOLATILITY MARKET ACCESS MARKET INDEX MARKET VALUE MATURITY MONETARY FINANCING MONETARY FUND MORAL HAZARD PAYMENT TERMS POLITICAL ECONOMY POLITICAL RISK PORTFOLIOS PRIVATE CAPITAL PRIVATE CREDITORS PRIVATE DEBT PRIVATE DEBTS PRIVATE INVESTMENT PRIVATE INVESTORS PRIVATE LENDERS PRIVATE LOANS PRIVATE] INVESTORS PRIVATIZATION PROBABILITY OF DEFAULT PUBLIC DEBT PUBLIC FINANCES PUBLIC INVESTMENTS PUBLIC SECTOR DEBT REAL EXCHANGE RATES REMAINING DEBT RENEGOTIATION RENEGOTIATIONS RESERVES RETURN RISK-FREE RATE RISKY ASSET SECONDARY MARKET SECONDARY MARKET PRICES SOLVENCY SOLVENCY PROBLEM SOVEREIGN BONDS SOVEREIGN DEBT SOVEREIGN DEBT MARKETS SOVEREIGN DEBT RESTRUCTURING SOVEREIGN DEBT RESTRUCTURING MECHANISM SOVEREIGN DEFAULTS SOVEREIGN LENDING SOVEREIGN RISK SOVEREIGN YIELD SWAP SWAPS T-BILL T-BILLS TAX TAX COLLECTIONS TOTAL DEBT TRADING TRANCHES TRANSACTIONS COSTS TREASURY TREASURY BILLS WAGES
spellingShingle	ACCOUNTING ADJUSTMENT LOANS ARBITRAGE ASSET CLASS ASSET PRICES BAILOUT BAILOUTS BALANCE SHEETS BANK LOANS BANK POLICY BANKING SECTOR BANKING SYSTEM BANKRUPTCIES BANKRUPTCY BANKRUPTCY MECHANISM BANKRUPTCY PROCEDURE BANKRUPTCY PROCESS BASIS POINTS BLACK MARKET BLACK MARKETS BOND BOND HOLDERS BOND ISSUE BOND ISSUES BOND SPREADS BONDHOLDERS BONDS BORROWING COST BORROWING COSTS BUDGET CONSTRAINT BUDGET CONSTRAINTS BUDGET SURPLUSES CAPITAL ACCOUNTS CAPITAL ADEQUACY CAPITAL MOBILITY CATALYTIC FINANCE CENTRAL BANK CENTRAL BANKS CODE OF CONDUCT COLLECTIVE ACTION COLLECTIVE ACTION CLAUSES COLLECTIVE ACTION PROBLEM COMMERCIAL BANK COMMERCIAL BANK LOANS COMMERCIAL BANKS CONTINGENT LIABILITIES CORPORATE TAX RATE COUNTRY DEBT CREDIBILITY CREDIT STANDING CREDITOR CREDITOR COORDINATION CREDITWORTHINESS CURRENCY CURRENCY BOARD CURRENCY CRISES CURRENCY CRISIS CURRENCY MISMATCHES CURRENT ACCOUNT SURPLUSES DEBT BURDEN DEBT CRISES DEBT CRISIS DEBT DEFAULT DEBT DEFAULTS DEBT EXCHANGE DEBT INSTRUMENTS DEBT OBLIGATIONS DEBT OUTSTANDING DEBT OVERHANG DEBT POLICY DEBT PROBLEM DEBT PROBLEMS DEBT REDUCTION DEBT RELIEF DEBT SERVICE DEBT SERVICE PAYMENTS DEBT SWAP DEBT SWAPS DEBTOR DEBTOR COUNTRIES DEBTOR COUNTRY DEBTORS DEFAULT RISK DEPOSIT DEVALUATION DEVELOPING COUNTRIES DEVELOPING COUNTRY DOLLAR DEBT DOMESTIC BANKS ECONOMIC POLICIES EMERGING MARKET EMERGING MARKET COUNTRIES EMERGING MARKETS EUROBOND EVENT OF INSOLVENCY EXCHANGE RATE EXTERNAL BORROWING EXTERNAL DEBT EXTERNAL DEBTS FACE VALUE FEDERAL DEPOSIT INSURANCE FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL STABILITY FINANCIAL SUPPORT FINANCIAL SYSTEM FISCAL DEFICIT FISCAL DEFICITS FIXED EXCHANGE RATE FIXED EXCHANGE RATES FIXED INCOME FLEXIBLE EXCHANGE RATES FLOATING RATE FLOATING RATE DEBTS FOREIGN BANKS FOREIGN EXCHANGE FOREIGN EXCHANGE RESERVE FOREIGN EXCHANGE RESERVES FREE RIDER PROBLEMS GLOBAL DEVELOPMENT FINANCE GLOBAL FINANCIAL STABILITY GLOBALIZATION GOVERNMENT BONDS GOVERNMENT DEBT HEDGE FUND HOLDING HOLDINGS HOME CURRENCIES INDEBTED INDEBTED POOR COUNTRIES INDIVIDUAL CREDITORS INFLATION INSOLVENCY SITUATION INSTITUTIONAL ARRANGEMENT INSURANCE INSURANCE CORPORATION INTEREST BURDEN INTEREST DIFFERENTIAL INTEREST PAYMENTS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANKRUPTCY INTERNATIONAL BOND INTERNATIONAL BOND MARKETS INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL MARKETS INTERNATIONAL ECONOMICS INTERNATIONAL LAW INVESTMENT BANKS LEGAL IMPEDIMENTS LENDER LENDER OF LAST RESORT LENDING DECISIONS LEVY LIQUIDITY LIQUIDITY PROBLEM LOAN LOCAL CURRENCY LONG BOND LONG TERM CAPITAL MACROECONOMIC CRISES MACROECONOMIC INSTABILITY MACROECONOMIC UNCERTAINTY MACROECONOMIC VOLATILITY MARKET ACCESS MARKET INDEX MARKET VALUE MATURITY MONETARY FINANCING MONETARY FUND MORAL HAZARD PAYMENT TERMS POLITICAL ECONOMY POLITICAL RISK PORTFOLIOS PRIVATE CAPITAL PRIVATE CREDITORS PRIVATE DEBT PRIVATE DEBTS PRIVATE INVESTMENT PRIVATE INVESTORS PRIVATE LENDERS PRIVATE LOANS PRIVATE] INVESTORS PRIVATIZATION PROBABILITY OF DEFAULT PUBLIC DEBT PUBLIC FINANCES PUBLIC INVESTMENTS PUBLIC SECTOR DEBT REAL EXCHANGE RATES REMAINING DEBT RENEGOTIATION RENEGOTIATIONS RESERVES RETURN RISK-FREE RATE RISKY ASSET SECONDARY MARKET SECONDARY MARKET PRICES SOLVENCY SOLVENCY PROBLEM SOVEREIGN BONDS SOVEREIGN DEBT SOVEREIGN DEBT MARKETS SOVEREIGN DEBT RESTRUCTURING SOVEREIGN DEBT RESTRUCTURING MECHANISM SOVEREIGN DEFAULTS SOVEREIGN LENDING SOVEREIGN RISK SOVEREIGN YIELD SWAP SWAPS T-BILL T-BILLS TAX TAX COLLECTIONS TOTAL DEBT TRADING TRANCHES TRANSACTIONS COSTS TREASURY TREASURY BILLS WAGES Canuto, Otaviano Pinto, Brian Prasad, Mona Orderly Sovereign Debt Restructuring : Missing in Action!
relation	Policy Research Working Paper; No. 6054
description	This paper takes a hard look at the experience with official intervention in sovereign debt crises, focusing on debt crises of the 1980s, Russia in 1998, Argentina in 2001, and Greece in 2010. Based on the track record, the authors argue that in situations where countries face a solvency problem, official intervention is more likely to succeed if official money is lent at the risk-free rate reflecting its seniority and private creditors receive an upfront haircut. Such an approach would limit the costs associated with procrastination and increase the chances of success by enabling a more realistic fiscal program to restore solvency. They examine the moral hazard implications for debtor countries of this proposal and find that these are unlikely to be severe. In fact, after their crises of 1997-2001, emerging market countries embarked on an aggressive and comprehensive program of self-insurance, indicating that they are weary of debt crises and their costs. However, the prospect of an upfront haircut for private creditors in the event of insolvency is likely to make them more diligent in their sovereign lending decisions.
format	Publications & Research :: Policy Research Working Paper
author	Canuto, Otaviano Pinto, Brian Prasad, Mona
author_facet	Canuto, Otaviano Pinto, Brian Prasad, Mona
author_sort	Canuto, Otaviano
title	Orderly Sovereign Debt Restructuring : Missing in Action!
title_short	Orderly Sovereign Debt Restructuring : Missing in Action!
title_full	Orderly Sovereign Debt Restructuring : Missing in Action!
title_fullStr	Orderly Sovereign Debt Restructuring : Missing in Action!
title_full_unstemmed	Orderly Sovereign Debt Restructuring : Missing in Action!
title_sort	orderly sovereign debt restructuring : missing in action!
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2012/05/16251472/orderly-sovereign-debt-restructuring-missing-action http://hdl.handle.net/10986/9363
_version_	1764409117958471680
spelling	okr-10986-93632021-04-23T14:02:44Z Orderly Sovereign Debt Restructuring : Missing in Action! Canuto, Otaviano Pinto, Brian Prasad, Mona ACCOUNTING ADJUSTMENT LOANS ARBITRAGE ASSET CLASS ASSET PRICES BAILOUT BAILOUTS BALANCE SHEETS BANK LOANS BANK POLICY BANKING SECTOR BANKING SYSTEM BANKRUPTCIES BANKRUPTCY BANKRUPTCY MECHANISM BANKRUPTCY PROCEDURE BANKRUPTCY PROCESS BASIS POINTS BLACK MARKET BLACK MARKETS BOND BOND HOLDERS BOND ISSUE BOND ISSUES BOND SPREADS BONDHOLDERS BONDS BORROWING COST BORROWING COSTS BUDGET CONSTRAINT BUDGET CONSTRAINTS BUDGET SURPLUSES CAPITAL ACCOUNTS CAPITAL ADEQUACY CAPITAL MOBILITY CATALYTIC FINANCE CENTRAL BANK CENTRAL BANKS CODE OF CONDUCT COLLECTIVE ACTION COLLECTIVE ACTION CLAUSES COLLECTIVE ACTION PROBLEM COMMERCIAL BANK COMMERCIAL BANK LOANS COMMERCIAL BANKS CONTINGENT LIABILITIES CORPORATE TAX RATE COUNTRY DEBT CREDIBILITY CREDIT STANDING CREDITOR CREDITOR COORDINATION CREDITWORTHINESS CURRENCY CURRENCY BOARD CURRENCY CRISES CURRENCY CRISIS CURRENCY MISMATCHES CURRENT ACCOUNT SURPLUSES DEBT BURDEN DEBT CRISES DEBT CRISIS DEBT DEFAULT DEBT DEFAULTS DEBT EXCHANGE DEBT INSTRUMENTS DEBT OBLIGATIONS DEBT OUTSTANDING DEBT OVERHANG DEBT POLICY DEBT PROBLEM DEBT PROBLEMS DEBT REDUCTION DEBT RELIEF DEBT SERVICE DEBT SERVICE PAYMENTS DEBT SWAP DEBT SWAPS DEBTOR DEBTOR COUNTRIES DEBTOR COUNTRY DEBTORS DEFAULT RISK DEPOSIT DEVALUATION DEVELOPING COUNTRIES DEVELOPING COUNTRY DOLLAR DEBT DOMESTIC BANKS ECONOMIC POLICIES EMERGING MARKET EMERGING MARKET COUNTRIES EMERGING MARKETS EUROBOND EVENT OF INSOLVENCY EXCHANGE RATE EXTERNAL BORROWING EXTERNAL DEBT EXTERNAL DEBTS FACE VALUE FEDERAL DEPOSIT INSURANCE FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL STABILITY FINANCIAL SUPPORT FINANCIAL SYSTEM FISCAL DEFICIT FISCAL DEFICITS FIXED EXCHANGE RATE FIXED EXCHANGE RATES FIXED INCOME FLEXIBLE EXCHANGE RATES FLOATING RATE FLOATING RATE DEBTS FOREIGN BANKS FOREIGN EXCHANGE FOREIGN EXCHANGE RESERVE FOREIGN EXCHANGE RESERVES FREE RIDER PROBLEMS GLOBAL DEVELOPMENT FINANCE GLOBAL FINANCIAL STABILITY GLOBALIZATION GOVERNMENT BONDS GOVERNMENT DEBT HEDGE FUND HOLDING HOLDINGS HOME CURRENCIES INDEBTED INDEBTED POOR COUNTRIES INDIVIDUAL CREDITORS INFLATION INSOLVENCY SITUATION INSTITUTIONAL ARRANGEMENT INSURANCE INSURANCE CORPORATION INTEREST BURDEN INTEREST DIFFERENTIAL INTEREST PAYMENTS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANKRUPTCY INTERNATIONAL BOND INTERNATIONAL BOND MARKETS INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL MARKETS INTERNATIONAL ECONOMICS INTERNATIONAL LAW INVESTMENT BANKS LEGAL IMPEDIMENTS LENDER LENDER OF LAST RESORT LENDING DECISIONS LEVY LIQUIDITY LIQUIDITY PROBLEM LOAN LOCAL CURRENCY LONG BOND LONG TERM CAPITAL MACROECONOMIC CRISES MACROECONOMIC INSTABILITY MACROECONOMIC UNCERTAINTY MACROECONOMIC VOLATILITY MARKET ACCESS MARKET INDEX MARKET VALUE MATURITY MONETARY FINANCING MONETARY FUND MORAL HAZARD PAYMENT TERMS POLITICAL ECONOMY POLITICAL RISK PORTFOLIOS PRIVATE CAPITAL PRIVATE CREDITORS PRIVATE DEBT PRIVATE DEBTS PRIVATE INVESTMENT PRIVATE INVESTORS PRIVATE LENDERS PRIVATE LOANS PRIVATE] INVESTORS PRIVATIZATION PROBABILITY OF DEFAULT PUBLIC DEBT PUBLIC FINANCES PUBLIC INVESTMENTS PUBLIC SECTOR DEBT REAL EXCHANGE RATES REMAINING DEBT RENEGOTIATION RENEGOTIATIONS RESERVES RETURN RISK-FREE RATE RISKY ASSET SECONDARY MARKET SECONDARY MARKET PRICES SOLVENCY SOLVENCY PROBLEM SOVEREIGN BONDS SOVEREIGN DEBT SOVEREIGN DEBT MARKETS SOVEREIGN DEBT RESTRUCTURING SOVEREIGN DEBT RESTRUCTURING MECHANISM SOVEREIGN DEFAULTS SOVEREIGN LENDING SOVEREIGN RISK SOVEREIGN YIELD SWAP SWAPS T-BILL T-BILLS TAX TAX COLLECTIONS TOTAL DEBT TRADING TRANCHES TRANSACTIONS COSTS TREASURY TREASURY BILLS WAGES This paper takes a hard look at the experience with official intervention in sovereign debt crises, focusing on debt crises of the 1980s, Russia in 1998, Argentina in 2001, and Greece in 2010. Based on the track record, the authors argue that in situations where countries face a solvency problem, official intervention is more likely to succeed if official money is lent at the risk-free rate reflecting its seniority and private creditors receive an upfront haircut. Such an approach would limit the costs associated with procrastination and increase the chances of success by enabling a more realistic fiscal program to restore solvency. They examine the moral hazard implications for debtor countries of this proposal and find that these are unlikely to be severe. In fact, after their crises of 1997-2001, emerging market countries embarked on an aggressive and comprehensive program of self-insurance, indicating that they are weary of debt crises and their costs. However, the prospect of an upfront haircut for private creditors in the event of insolvency is likely to make them more diligent in their sovereign lending decisions. 2012-06-29T22:28:42Z 2012-06-29T22:28:42Z 2012-05 http://documents.worldbank.org/curated/en/2012/05/16251472/orderly-sovereign-debt-restructuring-missing-action http://hdl.handle.net/10986/9363 English Policy Research Working Paper; No. 6054 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research

Orderly Sovereign Debt Restructuring : Missing in Action!

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