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Crisis costs and debtor discipline: the efficacy of public policy in sovereign debt crises

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  • Prasanna Gai
  • Simon Hayes
  • Hyun Song Shin

Abstract

Recent debate on the reform of the international financial architecture has highlighted the potentially important role of the official sector in crisis management. This paper examines how such public intervention in sovereign debt crises affects efficiency, ex ante and ex post. The results shed light on the scale of capital inflows in such a regime, and the analysis establishes conditions under which this leads to an improvement in debtor country welfare. The efficacy of measures such as officially sanctioned stays on creditor litigation depend critically on the quality of public sector surveillance and the size of the costs of sovereign debt crises.

Suggested Citation

  • Prasanna Gai & Simon Hayes & Hyun Song Shin, 2001. "Crisis costs and debtor discipline: the efficacy of public policy in sovereign debt crises," Bank of England working papers 136, Bank of England.
    • Handle: RePEc:boe:boeewp:136
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    References listed on IDEAS

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    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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