IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v38y1992i4p473-478.html
   My bibliography  Save this article

Duration of debt overhang with two lender banks

Author

Listed:
  • Prokop, Jacek

Abstract

This paper discusses the duration of the debt overhang with two lender banks. We model the problem as an infinite horizon game with two banks as players. In every period, each bank decides either to sell its loan exposure to the debtor country at the present secondary market price, or to wait and keep its exposure to the next period. Under the assumption of homogeneous price function and short length of periods, we show that the expected duration in the equilibrium becomes large when the degree of homogeneity is low, and tends to 1n 2/ 1n beta^2 (beta is the annual interest factor) as the degree of homogeneity approaches zero. This result implies that the lower bound for the duration is 4 years. We interpret it as a tendency for the debt overhang to last for a somewhat long time.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Prokop, Jacek, 1992. "Duration of debt overhang with two lender banks," Economics Letters, Elsevier, vol. 38(4), pages 473-478, April.
    • Handle: RePEc:eee:ecolet:v:38:y:1992:i:4:p:473-478
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/0165-1765(92)90036-X
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mamoru Kaneko & Jacek Prokop, 1993. "A game theoretical approach to the international debt overhang," Journal of Economics, Springer, vol. 58(1), pages 1-24, February.
    2. Jacek Prokop, 1998. "Dynamics of International Debt Overhang with Two Lender Banks," The Japanese Economic Review, Japanese Economic Association, vol. 49(2), pages 119-137, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Prokop, Jacek, 2012. "Bargaining over debt rescheduling," MPRA Paper 44315, University Library of Munich, Germany.
    2. Mamoru Kaneko & Jacek Prokop, 1993. "A game theoretical approach to the international debt overhang," Journal of Economics, Springer, vol. 58(1), pages 1-24, February.
    3. Prokop, Jacek, 1995. "Organized debt buybacks: No cure for free riding?," Journal of Development Economics, Elsevier, vol. 47(2), pages 481-496, August.
    4. Prokop, Jacek & Baranowska-Prokop, Ewa, 2012. "The Efficiency of Foreign Borrowing: The Case of Poland," MPRA Paper 44976, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Prokop, Jacek, 1995. "Organized debt buybacks: No cure for free riding?," Journal of Development Economics, Elsevier, vol. 47(2), pages 481-496, August.
    2. Prokop, Jacek, 2012. "Bargaining over debt rescheduling," MPRA Paper 44315, University Library of Munich, Germany.
    3. Prokop, Jacek & Baranowska-Prokop, Ewa, 2012. "The Efficiency of Foreign Borrowing: The Case of Poland," MPRA Paper 44976, University Library of Munich, Germany.
    4. Mamoru Kaneko & Jacek Prokop, 1993. "A game theoretical approach to the international debt overhang," Journal of Economics, Springer, vol. 58(1), pages 1-24, February.
    5. Pim Heijnen, 2009. "On the probability of breakdown in participation games," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 32(3), pages 493-511, March.
    6. David Nickerson & Asha Sadanand & Venkatraman Sadanand, 1994. "Strategic delay and endogenous offers in bargaining games with private information," Journal of Economics, Springer, vol. 60(2), pages 125-154, June.
    7. Jacek Prokop, 1998. "Dynamics of International Debt Overhang with Two Lender Banks," The Japanese Economic Review, Japanese Economic Association, vol. 49(2), pages 119-137, June.
    8. Eaton, Jonathan & Fernandez, Raquel, 1995. "Sovereign debt," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 3, pages 2031-2077, Elsevier.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:38:y:1992:i:4:p:473-478. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.