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A Delicate Equilibrium: Debt Relief and Default Penalties in an International Context

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  • International Monetary Fund

Abstract

Debt relief and penalties are discussed in connection with sovereign-country loans. We focus on conditions for the existence of penalties that are too low for ensuring Pareto efficiency, and show the possible time inconsistency of optimal debt contracts. A methodology for ascertaining debt relief implicit in international loans is outlined.

Suggested Citation

  • International Monetary Fund, 1989. "A Delicate Equilibrium: Debt Relief and Default Penalties in an International Context," IMF Working Papers 1989/010, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1989/010
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    Cited by:

    1. M. Badrul Haque & Charles R. Wartenberg, 1992. "Direct Effects Of Debt Overhang And Imf Programs," Review of Financial Economics, John Wiley & Sons, vol. 1(2), pages 30-39, March.
    2. Michael P. Dooley, 1994. "A Retrospective on the Debt Crisis," NBER Working Papers 4963, National Bureau of Economic Research, Inc.
    3. Joshua Aizenman & Eduardo R. Borensztein, 1989. "Strategic Investment in a Debt Bargaining Framework," NBER Working Papers 3019, National Bureau of Economic Research, Inc.

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