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- Debt Defaults and Lessons from a Decade of Crises
- Financial Crises : Causes, Consequences, and Policy Responses
- On the European debt crisis
- Debt Defaults and Lessons from a Decade of Crises, vol 1
Debt Defaults and Lessons from a Decade of Crises
Financial Crises: Causes, Consequences, and Policy Responses provides a comprehensive overview of research into financial crises and policy lessons learned. The book covers a wide range of crises, including banking, balance of payments, and sovereign debt crises. It begins with an overview of the various types of crises and introduces a comprehensive database of crises. Broad lessons on crisis prevention and management, as well as the short-term economic effects of crises, recessions, and recoveries are discussed.
The medium-term effects of financial crises on economic growth, as well as policy measures to prevent booms, mitigate busts, and avoid crises are analyzed. Finally, policy measures for mitigating the adverse impact of crises and ways to restructure banks, households, and sovereigns are presented. The collection of research in this book provides an excellent overview of critical policy areas, with valuable lessons on how countries can better monitor their economies and financial systems.
With the advent of the global financial crisis in , the issue of restructuring sovereign debt returned as a key concern to governments and market participants. However, there still appears to be limited understanding of how restructurings work in actual practice, and detailed historical insights are often missing.
This chapter provides an up-to date overview of the process of restructuring sovereign debt in developing economies and emerging markets based on the broad survey by Das, Papaioannou, and Trebesch The main contribution of the chapter is to distill a set of stylized facts and lessons learned from emerging market restructuring episodes from the late s following the Brady exchange, see Box The existing literature includes an increasing number of studies on individual country cases, but very little on cross-country experiences for all major sovereign debt restructurings since the late s.
By the late s, many developing economies had been in default for nearly a decade. They had settled on a chain of rescheduling agreements with their bank creditors, granting short-term liquidity relief but no cuts in face value.
The Brady Plan constituted a major policy shift, because the official sector started to encourage outright debt reduction so as to restore debtor solvency.
The plan was first announced by U. The Brady Plan is widely regarded as a success. The agreements also fostered a new wave of capital inflows to emerging markets. Sovereigns were able to re-access capital markets, stock markets rallied, and countries saw an increase in growth and investment, as documented by Arslanalp and Henry Based on their analysis, Arslanalp and Henry argue that debt relief can be efficient, particularly in countries that face debt overhang problems and that feature strong institutions and a viable private sector economy, thus attracting foreign investment flows.
However, not all hopes connected to the Brady Plan were fulfilled. As highlighted by Chuhan and Sturzenegger , the step-up of interest payments inherent in some of the new bonds threatened the debt sustainability of some debtors 10 years later, thus contributing to renewed default risks.
How often was sovereign debt restructured in recent decades? What are the determinants of default and debt restructurings? The second section focuses on procedural aspects of debt restructuring in detail: What are the required operational steps in preparing and implementing a sovereign debt exchange?
How did governments communicate with their creditor banks and bondholders? What are the most common debt-restructuring vehicles, in particular the Paris Club and the London Club? And how do modern-day sovereign bond exchanges work in practice? To answer these questions the section describes main insights from the existing literature and draws on newly available data. The third section summarizes the main characteristics of emerging market sovereign debt restructurings between and Among others, the following questions are addressed: What are the typical pitfalls in the restructuring process?
How long does it take to restructure sovereign bonds or loans? How frequent are creditor holdouts and litigation? How do domestic debt restructurings differ from external debt restructurings? And which legal clauses and remedies matter most when sovereign debt is restructured? The existing literature provides limited evidence on these practical questions.
The chapter concludes by discussing the financial stability considerations and other spillover concerns of a sovereign debt restructuring. How do restructurings affect growth or private credit? How quickly did countries reenter capital markets after a debt crisis?
What is the evidence of spillovers to the domestic financial sector? These questions are addressed by summarizing the related literature, particularly insights provided by the research of the past few years. The findings and stylized facts should not be interpreted as providing a full analysis of the underlying causes of restructurings or of their macroeconomic consequences.
Instead, the discussion provides new descriptive evidence and historical data in a field in which data are notoriously scarce. It should also be underscored that these insights are based on developing-economy experiences and may not apply to advanced economies or to sovereigns reliant on financing from interconnected financial systems. Nevertheless, the facts summarized here may be relevant for a broader audience interested in debt crises, their resolution, and outcomes.
While there is no universally accepted definition, a sovereign debt restructuring can be defined as an exchange of outstanding sovereign debt instruments, such as loans or bonds, for new debt instruments or cash through a formal process. Sovereign debt here refers to debt issued or guaranteed by the government of a sovereign state.
One can generally distinguish two main elements in a debt restructuring: debt rescheduling, defined as a lengthening of maturities of the old debt, possibly involving lower interest rates; and debt reduction, defined as a reduction in the face nominal value of the old instruments. However, it is important to distinguish distressed-debt exchanges from routine liability management operations aimed at improving the profile of public debt, such as debt swaps, which could occur in normal times Papaioannou, Default events and debt restructurings are closely related but not identical.
A default is the failure of a government to make a principal or interest payment on time beyond the grace period. In most cases, restructurings occur after defaults, and are known as postdefault restructurings. However, recent years have also seen a number of preemptive debt restructurings, in which outstanding debt instruments are exchanged before the government misses any payments.
Not all sovereign debt restructurings automatically trigger a credit event. Debt exchanges that are not forced upon creditors or debt exchanges in normal times may not constitute a credit event. According to a new database by Trebesch , sovereign debt—restructuring episodes have occurred throughout the world, with more than individual cases in 95 countries since Of these, were debt restructurings with private creditors foreign banks and bondholders and more than involved restructurings with the Paris Club government to government debt.
Restructuring in low-income countries often proceeded differently from those in emerging markets, including through official-debt-relief initiatives, which makes their experience less relevant for emerging markets. Das, Papaioannou, and Trebesch provide a detailed classification of all sovereign debt restructurings that took place between and Of the debt exchanges with foreign private creditors:.
Bond restructurings reentered the sovereign debt universe only after the Brady Plan of the mids see Box Since , with the debt crises in Pakistan, the Russian Federation, and Ukraine, 18 sovereign bond exchanges with foreign bondholders have occurred.
In addition to the debt restructurings with external creditors, there have been several bond restructurings aimed at domestic creditors. Some of these exchanges were implemented in parallel with debt restructurings with foreign creditors. A wide range of factors have contributed to default. Most defaults and restructuring episodes were triggered by one or more of the following factors: a worsening of the terms of trade; an increase in international borrowing costs e. From a historical perspective, Reinhart, Rogoff, and Savastano identify the occurrence of past defaults as a main predictor of missed payments and restructuring events.
Market perception, too, may have influenced the timing and occurrence of sovereign debt restructurings. When markets perceive a government as being less likely to repay in the future, its borrowing costs can rise rapidly and, therefore, its likelihood of default. Common risk indicators include secondary market bond and sovereign credit default swap spreads, as well as changes in sovereign ratings. Under extreme circumstances, a sudden change in investor perceptions may even act as a default trigger.
Debt crises and restructurings can be self-fulfilling and caused by contagion Cole and Kehoe, This risk is especially high when governments face large rollover risks Detragiache and Spilimbergo, The structure of the debt portfolio has also affected the likelihood and timing of default and debt negotiation. Factors that determine the debt profile e. However, sovereign debt portfolio risks are not always easy to assess, especially at times of generalized financial stress and heightened risk aversion.
The decision to restructure often depends on a combination of factors, and the following considerations are broadly valid regarding each of these factors:. This section presents key elements in the process of restructuring sovereign bonds and loans. For illustration, Figure The restructuring episode is triggered by a default on debt payments or the announcement of a debt restructuring. Thereafter, the government usually embarks on some form of negotiations with its creditors, either bilaterally or with the help of advisors.
The key purpose of the debt renegotiation is to agree on the terms of a debt exchange that will provide some form of debt relief and solve the distress situation. Source: Das, Papaioannou, and Trebesch Lim, Medeiros, and Xiao suggest verifying the following key characteristics:. The verification of claims allows countries to assess their debt stocks, debt-service profiles, and the value of the debt instruments.
This information lays the foundation for the next crucial procedural step, a detailed debt-sustainability analysis, which provides an indication of the financing gap, the necessary macroeconomic adjustment effort, and the degree of required debt relief. On this basis, governments typically develop a set of restructuring scenarios and prepare a final restructuring proposal, often with the support of legal and financial advisors. After the restructuring offer is presented to creditors, the creditors have to decide whether to accept or reject the offer.
In most cases, a successful exchange requires a certain minimum threshold of acceptance by creditors. Creditor coordination problems and holdout risks are thus likely to be most acute during this period. In most crisis cases, restructurings mark the end of a debt crisis episode, because the exchange of old for new debt puts the economy back on the path of debt sustainability. However, restructurings do not always put an end to debt distress. Some countries continue to incur arrears after a completed restructuring process and many examples can be found in which sovereigns implemented a series of subsequent restructurings, in particular during the s debt crisis.
The next subsections briefly review the evidence on debt-restructuring processes for each type of creditor involved. Specifically, it summarizes the experience of restructuring processes with regard to bilateral government to government debt renegotiated under the Paris Club umbrella; commercial bank debt London Club ; and bond debt sovereign bond restructurings.
A more detailed presentation on debt-restructuring processes for these creditor groups is provided in Rieffel Table Note that the restructuring of supplier and trade credits is not discussed in detail because it usually takes place on an ad hoc basis or is excluded from the restructuring exercise. The Paris Club is the main institutional framework for restructuring external bilateral sovereign debt, that is, public and publicly guaranteed debt that debtor countries owe to other governments.
Financial Crises : Causes, Consequences, and Policy Responses
Argentina's default and the lack of dire consequences. I University of Illinois at Urbana-Champaign. Email: wbaer uiuc. Email: margot uiuc. Email: Gabriel. We analyze the Argentine default on its foreign debt and its consequences in terms of the existing literature on sovereign debt default.
In Debt Defaults and Lessons from a Decade of Crises, Federico Sturzenegger and Jeromin Zettelmeyer examine the facts, the economic theory, and the policy.
On the European debt crisis
Financial Crises: Causes, Consequences, and Policy Responses provides a comprehensive overview of research into financial crises and policy lessons learned. The book covers a wide range of crises, including banking, balance of payments, and sovereign debt crises. It begins with an overview of the various types of crises and introduces a comprehensive database of crises.
In Debt Defaults and Lessons from a Decade of Crises, Federico Sturzenegger and Jeromin Zettelmeyer examine the facts, the economic theory, and the policy implications of sovereign debt crises.
Debt Defaults and Lessons from a Decade of Crises, vol 1
By Federico Sturzenegger and Jeromin Zettelmeyer. Detailed case studies of debt defaults by Russia, Ukraine, Pakistan, Ecuador, Moldova, and Uruguay, framed by a comprehensive discussion of the history, economic theory, legal issues, and policy lessons of sovereign debt crises. The debt crises in emerging market countries over the past decade have given rise to renewed debate about crisis prevention and resolution. In Debt Defaults and Lessons from a Decade of Crises , Federico Sturzenegger and Jeromin Zettelmeyer examine the facts, the economic theory, and the policy implications of sovereign debt crises.
Beker, Victor : On the European debt crisis. A common explanation for the European debt crisis has been that the introduction of the euro in caused interest rates to fall in those countries where expectations of high inflation previously kept interest rates high. Bond buyers assumed that a bond issued by any government in the European Monetary Union was equally safe. As a result, the interest rates on Greek, Italian, etc. Governments responded to the low interest rates by increasing their borrowing.
The world urgently needs a mechanism to more effectively manage the financial crises that develop when debtor countries are unable to repay their international debts. The rapid expansion of international capital flows has been one of the dominant characteristics of globalization. Whilst highly beneficial for some market players, in some cases speculative attacks have brought about considerable economic and social damage to several countries. The last three decades witnessed a significantnumber of financial crises, which mostly impacted emerging market economies but were also felt in highly developed economies. The debt crisis in Latin America in the s, the Asian crisis of the late s and the American-born Global Financial crisis of brought financial turmoil created by sovereign debt into public prominence. Addressing this issue became part of the official agenda following spectacular sovereign defaults, such as that of Argentina at the beginning of the century.
Restructuring Bilateral Debt: the Paris Club
In the developing world, there were severe financial crises in both the s and 90s. But the nature of crises was quite different between the two decades. In the s, the world experienced a debt crisis in which highly indebted Latin America and other developing regions were unable to repay the debt, asking for help. The problem exploded in August as Mexico declared inability to service its international debt, and the similar problem quickly spread to the rest of the world. To counter this, macroeconomic tightening and "structural adjustment" liberalization and privatization were administered, often through the conditionality of the IMF and the World Bank. This crisis involved long-term commercial bank debt which was accumulated in the public sector including debt owed by SOEs and guaranteed by the government.
Skip to search form Skip to main content You are currently offline. Some features of the site may not work correctly. DOI: Sturzenegger , Jeromin Zettelmeyer Published Economics. The debt crises in emerging market countries over the past decade have given rise to renewed debate about crisis prevention and resolution. In Debt Defaults and Lessons from a Decade of Crises, Federico Sturzenegger and Jeromin Zettelmeyer examine the facts, the economic theory, and the policy implications of sovereign debt crises.
Beatrice Weder, Beatrice Weder di Ma Macroeconomics International Economics. Journal of Development Economics 98 2 , , Journal of economic literature 47 3 , , Journal of international Money and Finance 27 5 , , Journal of Monetary Economics 51 3 , , Journal of International Economics 89 2 , ,
- Мне нужен список очередности работы на ТРАНСТЕКСТЕ. Если Стратмор обошел фильтры вручную, данный факт будет отражен в распечатке.
- Мистер Чатрукьян, - буквально прорычал он, - дискуссия закончена. Вы должны немедленно покинуть шифровалку. Немедленно. Это приказ. Чатрукьян замер от неожиданности.
Его арабские шпили и резной фасад создавали впечатление скорее дворца - как и было задумано, - чем общественного учреждения. За свою долгую историю оно стало свидетелем переворотов, пожаров и публичных казней, однако большинство туристов приходили сюда по совершенно иной причине: туристические проспекты рекламировали его как английский военный штаб в фильме Лоуренс Аравийский. Коламбия пикчерз было гораздо дешевле снять эту картину в Испании, нежели в Египте, а мавританское влияние на севильскую архитектуру с легкостью убедило кинозрителей в том, что перед их глазами Каир. Беккер перевел свои Сейко на местное время - 9. 10 вечера, по местным понятиям еще день: порядочный испанец никогда не обедает до заката, а ленивое андалузское солнце редко покидает небо раньше десяти.
Когда я впервые увидел эти цепи, сэр, - говорил Чатрукьян, - я подумал, что фильтры системы Сквозь строй неисправны. Но затем я сделал несколько тестов и обнаружил… - Он остановился, вдруг почувствовав себя не в своей тарелке. - Я обнаружил, что кто-то обошел систему фильтров вручную. Эти слова были встречены полным молчанием. Лицо Стратмора из багрового стало пунцовым.