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Holdouts in Sovereign Debt Restructuring: A Theory of Negotiation in a Weak Contractual Environment

Pitchford, Rohan; Wright, Mark L J

Description

Why is it difficult to restructure sovereign debt in a timely manner? In this paper, we present a theory of the sovereign debt-restructuring process in which delay arises as individual creditors hold up a settlement in order to extract greater payments from the sovereign. We then use the theory to analyse recent policy proposals aimed at ensuring equal repayment of creditor claims. Strikingly, we show that such collective action policies may increase delay by encouraging free riding on...[Show more]

CollectionsANU Research Publications
Date published: 2011
Type: Journal article
URI: http://hdl.handle.net/1885/32270
Source: Review of Economic Studies
DOI: 10.1093/restud/rdr038

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