Sovereign Debt Restructurings: Panacea or Pangloss?

33 Pages Posted: 4 Jul 2004 Last revised: 17 Sep 2010

See all articles by Jeremy Bulow

Jeremy Bulow

Stanford University; National Bureau of Economic Research (NBER)

Kenneth Rogoff

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 1988

Abstract

The most widely proposed LDC debt plans are flawed by their failure to recognize the fundamental differences between corporate and sovereign debt. Consequently, many plans intended to help highly-indebted countries mainly aid their foreign creditors. This paper emphasizes the crucial distinction between marginal and average sovereign debt. This distinction provides the cornerstone for an understanding of debt buybacks, debt-equity swaps, and debt-for-debt swaps involving new classes of seniority. Highly indebted countries would benefit more from direct transfers than from the same resources spent on any of these financial engineering schemes.

Suggested Citation

Bulow, Jeremy I. and Rogoff, Kenneth S., Sovereign Debt Restructurings: Panacea or Pangloss? (June 1988). NBER Working Paper No. w2637. Available at SSRN: https://ssrn.com/abstract=238158

Jeremy I. Bulow (Contact Author)

Stanford University ( email )

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Kenneth S. Rogoff

Harvard University - Department of Economics ( email )

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