Multilateral Developing-Country Debt Rescheduling Negotiations: A Bargaining-Theoretic Framework

16 Pages Posted: 15 Feb 2006

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: April 18, 1988

Abstract

This paper employs a dynamic bargaining-theoretic framework to analyze multilateral sovereign debt rescheduling negotiations. The analysis illustrates how various factors, such as the debtor`s gains from trade and the level of world interest rates, affect the relative bargaining power of various parties to a rescheduling agreement. If creditor-country taxpayers have a vested interest in maintaining normal levels of trade with debtor countries, then they can sometimes be bargained into making sidepayments. The benefits from unanticipated creditor-country sidepayments accrue to both lenders and borrowers. But the benefits from perfectly anticipated sidepayments accrue entirely to borrowers.

JEL Classification: 433

Suggested Citation

Bulow, Jeremy I. and Rogoff, Kenneth S., Multilateral Developing-Country Debt Rescheduling Negotiations: A Bargaining-Theoretic Framework (April 18, 1988). IMF Working Paper, Vol. , pp. 1-16, 1988. Available at SSRN: https://ssrn.com/abstract=884729

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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