Trade Interdependence, the International Financial Institutions, and the Recent Evolution of Sovereign-Debt Renegotiations
36 Pages Posted: 27 Dec 2001
Date Written: October 22, 2001
This paper analyzes the effect of a debtor country's pattern of trade with commercial creditors' home countries on the outcome of debt-rescheduling negotiations. The analysis reveals that a debtor country with more market power has greater leverage in a three-way debt-rescheduling negotiation that includes the debtor country, its creditors and the International Financial Institutions (IFIs). The paper also considers the effects of the IFI sovereign-debt policy on the bargaining power of the parties in debt-rescheduling negotiations. Two bargaining frameworks analyzed and compared in the paper represent the negotiation mechanism at different stages of the IFI sovereign-debt policy evolution.
Keywords: Bargaining Games, Negotiations, Debt Rescheduling
JEL Classification: C78, F34
Suggested Citation: Suggested Citation