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Discussion Paper Details

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Title: Settling Defaults in the Era of Bond Finance

Author(s): Barry Eichengreen and Richard Portes

Publication Date: September 1988

Keyword(s): Debt Crisis, Debtor Nation, International Debt and Sovereign Borrowing

Programme Area(s): International Macroeconomics

Abstract: We scrutinize two strands of received wisdom about debt crises: that which draws a strong contrast between the 1930s and 1980s in extent of default and ease of settlement, and that which attributes the difference to greater government involvement today. Rather than a sharp, dichotomous variable, default in the 1930s was often partial and intermittent. Neither was settlement achieved in a way that readily permitted countries to put the debt crisis behind them. And creditor-country governments were often intimately involved in the process of debt negotiation. We consider a number of additional factors influencing the ease of settlement: (i) institutional features of the lending process; (ii) institutional features of the settlement process; (iii) the role of national divisions within the creditor community; (iv) the influence of global commodity- and credit-market conditions over the process of settlement.

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Bibliographic Reference

Eichengreen, B and Portes, R. 1988. 'Settling Defaults in the Era of Bond Finance'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=272