Sovereign Debt Workouts with the IMF as Delegated Monitor - A Common Agency Approach
Bank of England
Bank for International Settlements Staff
Bank of England Working Paper No. 187
IMF programmes are frequently criticised for lacking focus and being ineffective in helping maintain private credit lines following a debt crisis. We develop a theoretical model to explore the interlinkages between result-based conditionality and creditor collective action problems. The model highlights the strategic interactions between official and private creditors, and clarifies some of the trade-offs that underpin the design of IMF programmes. We identify conditions under which official creditors are able to limit the efficiency losses generated by creditor non-cooperation and debtor moral hazard. The circumstances under which official lending is able to "catalyse" private sector finance are also analysed.
Number of Pages in PDF File: 34
Keywords: Crisis management, IMF conditionality, private sector involvement, common agency probelms
JEL Classification: F33, F34
Date posted: September 23, 2003
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