Discussion Paper Details

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Title: Waiting for a haircut? A bargaining perspective on sovereign debt restructuring

Author(s): Sayantan Ghosal, Marcus Miller and Kannika Thampanishvong

Publication Date: December 2016

Keyword(s): asymmetric information, debt restructuring, delay, growth and sustainability

Programme Area(s): International Macroeconomics and Finance

Abstract: Recent investigation of sovereign debt negotiations finds that prompt, market-friendly "reprofiling" often fails to achieve sustainability; but serious debt restructuring typically involves delay. We develop an incomplete information bargaining model to account for this, highlighting economic recovery and sustainability considerations as complementary reasons for delay. Some recent settlements are discussed, along with some policy implications of excessive profiling.

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Bibliographic Reference

Ghosal, S, Miller, M and Thampanishvong, K. 2016. 'Waiting for a haircut? A bargaining perspective on sovereign debt restructuring'. London, Centre for Economic Policy Research.