Jerome L. Stein
- Published in print:
- 2006
- Published Online:
- May 2006
- ISBN:
- 9780199280575
- eISBN:
- 9780191603501
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199280576.001.0001
- Subject:
- Economics and Finance, Financial Economics
This book focuses on the interaction between equilibrium real exchange rates, optimal external debt, endogenous optimal growth, and current account balances in a world of uncertainty. The theoretical ...
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This book focuses on the interaction between equilibrium real exchange rates, optimal external debt, endogenous optimal growth, and current account balances in a world of uncertainty. The theoretical parts result from interdisciplinary research between economics and state of the art applied mathematics. From the economic theory and the mathematics of stochastic optimal control, benchmarks are derived for the optimal debt and equilibrium real exchange rate in an environment where both the return on capital and the real rate of interest are stochastic variables. The theoretically derived equilibrium real exchange rate — the natural real exchange rate (NATREX) — is where the real exchange rate is heading. These benchmarks are applied to answer the following questions: What is a theoretically based empirical measure of a “misaligned” exchange rate that increases the probability of a significant depreciation or a currency crisis? What is a theoretically based empirical measure of an “excess” debt that increases the probability of a debt crisis? What is the interaction between an excess debt and a misaligned exchange rate? The theory is applied to evaluate the Euro exchange rate, the exchange rates of the transition economies of Eastern Europe, the sustainability of U.S. current account deficits, and derives warning signals of the Asian crises, defaults, and debt crises in emerging markets.Less
This book focuses on the interaction between equilibrium real exchange rates, optimal external debt, endogenous optimal growth, and current account balances in a world of uncertainty. The theoretical parts result from interdisciplinary research between economics and state of the art applied mathematics. From the economic theory and the mathematics of stochastic optimal control, benchmarks are derived for the optimal debt and equilibrium real exchange rate in an environment where both the return on capital and the real rate of interest are stochastic variables. The theoretically derived equilibrium real exchange rate — the natural real exchange rate (NATREX) — is where the real exchange rate is heading. These benchmarks are applied to answer the following questions: What is a theoretically based empirical measure of a “misaligned” exchange rate that increases the probability of a significant depreciation or a currency crisis? What is a theoretically based empirical measure of an “excess” debt that increases the probability of a debt crisis? What is the interaction between an excess debt and a misaligned exchange rate? The theory is applied to evaluate the Euro exchange rate, the exchange rates of the transition economies of Eastern Europe, the sustainability of U.S. current account deficits, and derives warning signals of the Asian crises, defaults, and debt crises in emerging markets.
Jerome L. Stein
- Published in print:
- 2006
- Published Online:
- May 2006
- ISBN:
- 9780199280575
- eISBN:
- 9780191603501
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199280576.003.0008
- Subject:
- Economics and Finance, Financial Economics
The Asian financial crises were unexpected by the market and many countries in the region experienced it at about the same time. Drawing upon the theoretical analyses in chapters 2-4, an operational ...
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The Asian financial crises were unexpected by the market and many countries in the region experienced it at about the same time. Drawing upon the theoretical analyses in chapters 2-4, an operational theory is provided to answer the following questions for the Asian countries: Was a currency crisis produced by an overvalued real exchange rate? Was a debt crisis produced by an “excessive/unsustainable” external debt? What was the interaction between the two? The models imply a set of objective, theoretically-based warning signals and empirical analysis allows the assessment of which countries were or were not highly vulnerable to shocks.Less
The Asian financial crises were unexpected by the market and many countries in the region experienced it at about the same time. Drawing upon the theoretical analyses in chapters 2-4, an operational theory is provided to answer the following questions for the Asian countries: Was a currency crisis produced by an overvalued real exchange rate? Was a debt crisis produced by an “excessive/unsustainable” external debt? What was the interaction between the two? The models imply a set of objective, theoretically-based warning signals and empirical analysis allows the assessment of which countries were or were not highly vulnerable to shocks.
Daniel Marx, Jose Echague, and Guido Sandleris
- Published in print:
- 2006
- Published Online:
- May 2006
- ISBN:
- 9780195168006
- eISBN:
- 9780199783458
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0195168003.003.0004
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter analyzes the main problems of the current global sovereign debt markets, particularly in relation to emerging countries, and presents some policy recommendations. It describes the ...
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This chapter analyzes the main problems of the current global sovereign debt markets, particularly in relation to emerging countries, and presents some policy recommendations. It describes the evolution of sovereign debt markets during the 1990s. It then focuses on the emerging countries' debt crises of the late 1990s and their resolution. Finally, drawing from the analysis of the previous sections, it argues that there is room for significant improvements in the architecture of sovereign debt markets and that emerging countries have much to do in terms of unilateral reforms.Less
This chapter analyzes the main problems of the current global sovereign debt markets, particularly in relation to emerging countries, and presents some policy recommendations. It describes the evolution of sovereign debt markets during the 1990s. It then focuses on the emerging countries' debt crises of the late 1990s and their resolution. Finally, drawing from the analysis of the previous sections, it argues that there is room for significant improvements in the architecture of sovereign debt markets and that emerging countries have much to do in terms of unilateral reforms.
Jerome L. Stein
- Published in print:
- 2006
- Published Online:
- May 2006
- ISBN:
- 9780199280575
- eISBN:
- 9780191603501
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199280576.003.0001
- Subject:
- Economics and Finance, Financial Economics
This overview chapter explains the relevance and the contributions of this book to economic theory and policy. The economic theory and mathematics developed in chapters 2 and 3 derive benchmarks for ...
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This overview chapter explains the relevance and the contributions of this book to economic theory and policy. The economic theory and mathematics developed in chapters 2 and 3 derive benchmarks for the optimal debt in an environment where both the return on capital and the real rate of interest are stochastic variables. The equilibrium real exchange rate, the subject of chapter 4, is where the real exchange rate is heading. These benchmarks are applied in chapters 5-9 to the euro, the real exchange rate of the transition economies in Eastern Europe, default risks in emerging market countries, the Asian crises, and the United States current account deficits.Less
This overview chapter explains the relevance and the contributions of this book to economic theory and policy. The economic theory and mathematics developed in chapters 2 and 3 derive benchmarks for the optimal debt in an environment where both the return on capital and the real rate of interest are stochastic variables. The equilibrium real exchange rate, the subject of chapter 4, is where the real exchange rate is heading. These benchmarks are applied in chapters 5-9 to the euro, the real exchange rate of the transition economies in Eastern Europe, default risks in emerging market countries, the Asian crises, and the United States current account deficits.
Jack Boorman
- Published in print:
- 2006
- Published Online:
- May 2006
- ISBN:
- 9780195168006
- eISBN:
- 9780199783458
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0195168003.003.0012
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter discusses ideas for resolving debt crises. It argues that a narrow focus on debt relief in HIPCs is insufficient and that the activist community and lenders must look to finding broader ...
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This chapter discusses ideas for resolving debt crises. It argues that a narrow focus on debt relief in HIPCs is insufficient and that the activist community and lenders must look to finding broader measures of foreign aid and creating a fair trading environment. In the end, finding the “right” level of debt relief is impossible and ignores the more important aim of delivering a better life to impoverished people. Support is given to a proposal floated by the IMF for a sovereign debt restructuring mechanism (SDRM) to resolve pending debt crises in developing countries.Less
This chapter discusses ideas for resolving debt crises. It argues that a narrow focus on debt relief in HIPCs is insufficient and that the activist community and lenders must look to finding broader measures of foreign aid and creating a fair trading environment. In the end, finding the “right” level of debt relief is impossible and ignores the more important aim of delivering a better life to impoverished people. Support is given to a proposal floated by the IMF for a sovereign debt restructuring mechanism (SDRM) to resolve pending debt crises in developing countries.
Jerome L. Stein
- Published in print:
- 2006
- Published Online:
- May 2006
- ISBN:
- 9780199280575
- eISBN:
- 9780191603501
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199280576.003.0007
- Subject:
- Economics and Finance, Financial Economics
Early Warning Signals of a default or debt crisis are derived by drawing upon the stochastic optimal control model of an optimal and excessive short-term debt developed in chapter 2. Operational ...
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Early Warning Signals of a default or debt crisis are derived by drawing upon the stochastic optimal control model of an optimal and excessive short-term debt developed in chapter 2. Operational benchmarks for optimal foreign debt and a quantitative measure of the maximum debt which will not be defaulted in the event of adverse shocks are established. Insofar as the actual debt exceeds the benchmark, there is an excess debt, the risk of default is increased. Two sets of emerging market countries are considered: one set renegotiated/defaulted and the other set did not. The countries that defaulted/renegotiated had significant excess debt, whereas the countries that did not default/renegotiate did not have significant excess debt. An Early Warning Signal of a debt crisis is the excess debt, and not the level of the debt/GDP ratio per se.Less
Early Warning Signals of a default or debt crisis are derived by drawing upon the stochastic optimal control model of an optimal and excessive short-term debt developed in chapter 2. Operational benchmarks for optimal foreign debt and a quantitative measure of the maximum debt which will not be defaulted in the event of adverse shocks are established. Insofar as the actual debt exceeds the benchmark, there is an excess debt, the risk of default is increased. Two sets of emerging market countries are considered: one set renegotiated/defaulted and the other set did not. The countries that defaulted/renegotiated had significant excess debt, whereas the countries that did not default/renegotiate did not have significant excess debt. An Early Warning Signal of a debt crisis is the excess debt, and not the level of the debt/GDP ratio per se.
RUMU SARKAR
- Published in print:
- 2009
- Published Online:
- February 2010
- ISBN:
- 9780195398281
- eISBN:
- 9780199866366
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195398281.003.005
- Subject:
- Law, Human Rights and Immigration, Public International Law
This chapter explains the international financial architecture supporting the financing of international development. It examines the international borrowing practices of sovereign states, and ...
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This chapter explains the international financial architecture supporting the financing of international development. It examines the international borrowing practices of sovereign states, and analyzes two case studies of the Mexican and Asian financial crises. These sovereign debt crises are examined from the standpoint of strategic and tactical approaches to resolving them, and preventing financial contagion in the future. The current global financial contagion, originating in the United States, and its impact on developing countries, is reviewed from a “lessons learned” perspective. Tactical approaches to resolving sovereign debt crises such as debt-for-debt exchanges, debt-equity swaps, debt securitization, credit facilities, and special financing techniques are critically reviewed. Finally, debt relief as a development strategy is critically examined. Explanatory text boxes and other graphics are provided to assist the reader absorb a complex area of law.Less
This chapter explains the international financial architecture supporting the financing of international development. It examines the international borrowing practices of sovereign states, and analyzes two case studies of the Mexican and Asian financial crises. These sovereign debt crises are examined from the standpoint of strategic and tactical approaches to resolving them, and preventing financial contagion in the future. The current global financial contagion, originating in the United States, and its impact on developing countries, is reviewed from a “lessons learned” perspective. Tactical approaches to resolving sovereign debt crises such as debt-for-debt exchanges, debt-equity swaps, debt securitization, credit facilities, and special financing techniques are critically reviewed. Finally, debt relief as a development strategy is critically examined. Explanatory text boxes and other graphics are provided to assist the reader absorb a complex area of law.
Mario Damill, Roberto Frenkel, and Martín Rapetti
- Published in print:
- 2010
- Published Online:
- May 2010
- ISBN:
- 9780199578788
- eISBN:
- 9780191723049
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199578788.003.0008
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Development, Growth, and Environmental
This chapter avers that the key to understanding the leadup to the Argentinean debt crisis was the particular anti‐inflation and growth strategy—followed first in 1979–81 and in a more radical way in ...
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This chapter avers that the key to understanding the leadup to the Argentinean debt crisis was the particular anti‐inflation and growth strategy—followed first in 1979–81 and in a more radical way in 1991–2001—of fixing the exchange rate, liberalizing the economy, and fully opening it to international financial flows. The chapter shows that funds first rushed into Argentina to take advantage of high nominal interest rates in an inflationary environment, which also helped spur economic recovery. However, later the funds fled the country as confidence in the sustainability of growth and of the exchange rate regime dissipated owing both to real appreciation (domestic inflation, while slowing, still exceeded international rates) and to vulnerability to exogenous shocks in the context of a growing foreign debt burden.Less
This chapter avers that the key to understanding the leadup to the Argentinean debt crisis was the particular anti‐inflation and growth strategy—followed first in 1979–81 and in a more radical way in 1991–2001—of fixing the exchange rate, liberalizing the economy, and fully opening it to international financial flows. The chapter shows that funds first rushed into Argentina to take advantage of high nominal interest rates in an inflationary environment, which also helped spur economic recovery. However, later the funds fled the country as confidence in the sustainability of growth and of the exchange rate regime dissipated owing both to real appreciation (domestic inflation, while slowing, still exceeded international rates) and to vulnerability to exogenous shocks in the context of a growing foreign debt burden.
Barry Herman, José Antonio Ocampo, and Shari Spiegel (eds)
- Published in print:
- 2010
- Published Online:
- May 2010
- ISBN:
- 9780199578788
- eISBN:
- 9780191723049
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199578788.001.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Development, Growth, and Environmental
Developing country debt crises have been a recurrent phenomenon over the past two centuries. Despite the fact that several developing countries now have stronger economic fundamentals than they did ...
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Developing country debt crises have been a recurrent phenomenon over the past two centuries. Despite the fact that several developing countries now have stronger economic fundamentals than they did in the 1990s, sovereign debt crises will recur. Indeed, today we are in the midst of an almost unprecedented global ‘bust’. The conventional wisdom today is that the international economic and financial system is broken. The call in this book for international reform of sovereign debt workouts derives from both economic theory and real‐world experiences of different processes used for debt workouts. Country case studies underline the point that we need to do better. We recognize that the politics of the international treatment of sovereign debt has not supported systemic reform efforts thus far; however, failure in the past does not preclude success in the future in an evolving international political environment, and the book thus puts forth alternative reform ideas for consideration.Less
Developing country debt crises have been a recurrent phenomenon over the past two centuries. Despite the fact that several developing countries now have stronger economic fundamentals than they did in the 1990s, sovereign debt crises will recur. Indeed, today we are in the midst of an almost unprecedented global ‘bust’. The conventional wisdom today is that the international economic and financial system is broken. The call in this book for international reform of sovereign debt workouts derives from both economic theory and real‐world experiences of different processes used for debt workouts. Country case studies underline the point that we need to do better. We recognize that the politics of the international treatment of sovereign debt has not supported systemic reform efforts thus far; however, failure in the past does not preclude success in the future in an evolving international political environment, and the book thus puts forth alternative reform ideas for consideration.
E. Philip Davis
- Published in print:
- 1995
- Published Online:
- November 2003
- ISBN:
- 9780198233312
- eISBN:
- 9780191596124
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198233310.003.0007
- Subject:
- Economics and Finance, Financial Economics
In this chapter, we test the theories of financial instability outlined in Ch. 5 against evidence from six periods of financial instability since 1973, namely the UK secondary banking crisis of ...
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In this chapter, we test the theories of financial instability outlined in Ch. 5 against evidence from six periods of financial instability since 1973, namely the UK secondary banking crisis of December 1973, the Herstatt crisis of June 1974, the advent of the LDC Debt Crisis in August 1982, the crisis in the FRN market of December 1986, the equity market crash of October 1987, and the US thrifts crises of the 1980s. Background on wholesale financial markets—in which most of the crises occurred—is provided in Sect. 1. In Sect. 2, the events of the periods of financial disorder are outlined. Three crises took place largely in international capital markets; one linked international and domestic and the other two were purely in domestic financial markets. Virtually all occurred in unregulated or liberalized financial markets. Section 3 sets these crises in the context of the long‐run behaviour of prices and quantities in the financial markets with a graphical illustration of the 1966–90 period. The behaviour of key economic indicators as well as market prices and quantities surrounding these events is examined in more detail in Sect. 4. These sections permit a qualitative evaluation in Sect. 5 of the theories of crisis; the results also cast light on the behaviour of financial markets under stress and give indications of appropriate policy responses.Less
In this chapter, we test the theories of financial instability outlined in Ch. 5 against evidence from six periods of financial instability since 1973, namely the UK secondary banking crisis of December 1973, the Herstatt crisis of June 1974, the advent of the LDC Debt Crisis in August 1982, the crisis in the FRN market of December 1986, the equity market crash of October 1987, and the US thrifts crises of the 1980s. Background on wholesale financial markets—in which most of the crises occurred—is provided in Sect. 1. In Sect. 2, the events of the periods of financial disorder are outlined. Three crises took place largely in international capital markets; one linked international and domestic and the other two were purely in domestic financial markets. Virtually all occurred in unregulated or liberalized financial markets. Section 3 sets these crises in the context of the long‐run behaviour of prices and quantities in the financial markets with a graphical illustration of the 1966–90 period. The behaviour of key economic indicators as well as market prices and quantities surrounding these events is examined in more detail in Sect. 4. These sections permit a qualitative evaluation in Sect. 5 of the theories of crisis; the results also cast light on the behaviour of financial markets under stress and give indications of appropriate policy responses.
Barry Herman
- Published in print:
- 2010
- Published Online:
- May 2010
- ISBN:
- 9780199578788
- eISBN:
- 9780191723049
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199578788.003.0014
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Development, Growth, and Environmental
This chapter turns our attention to a reform initiative driven by the private financial community in the form of a voluntary code of good conduct that would informally pressure the debtor countries ...
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This chapter turns our attention to a reform initiative driven by the private financial community in the form of a voluntary code of good conduct that would informally pressure the debtor countries to follow policies and practices that the creditors advocate. Although implementation of the code is now monitored by a group of prominent individuals from the private and public sectors convoked by an international bankers' organization, it is not clear that it will play a role in any wave of sovereign insolvencies. After all, and unlike a bankruptcy regime, it is purely voluntary. This chapter suggests, instead, how to develop an alternative that would have greater credibility with debtors as well as creditors and could have some force behind it.Less
This chapter turns our attention to a reform initiative driven by the private financial community in the form of a voluntary code of good conduct that would informally pressure the debtor countries to follow policies and practices that the creditors advocate. Although implementation of the code is now monitored by a group of prominent individuals from the private and public sectors convoked by an international bankers' organization, it is not clear that it will play a role in any wave of sovereign insolvencies. After all, and unlike a bankruptcy regime, it is purely voluntary. This chapter suggests, instead, how to develop an alternative that would have greater credibility with debtors as well as creditors and could have some force behind it.
Jerome Roos
- Published in print:
- 2019
- Published Online:
- May 2019
- ISBN:
- 9780691180106
- eISBN:
- 9780691184937
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691180106.003.0001
- Subject:
- Business and Management, Public Management
This introductory chapter first sets out the book's purpose, which is to contribute to debates on the power of finance and the consequences of contemporary patterns in international crisis management ...
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This introductory chapter first sets out the book's purpose, which is to contribute to debates on the power of finance and the consequences of contemporary patterns in international crisis management for social justice and democracy. It does so by revisiting a seemingly simple question whose answer has nonetheless eluded economists for decades: why do so many heavily indebted countries continue to service their external debts even in times of acute fiscal distress? The chapter then presents a brief history of sovereign default followed by discussions of why governments repay their debts, the three enforcement mechanisms of debtor compliance, and consequences for international crisis management.Less
This introductory chapter first sets out the book's purpose, which is to contribute to debates on the power of finance and the consequences of contemporary patterns in international crisis management for social justice and democracy. It does so by revisiting a seemingly simple question whose answer has nonetheless eluded economists for decades: why do so many heavily indebted countries continue to service their external debts even in times of acute fiscal distress? The chapter then presents a brief history of sovereign default followed by discussions of why governments repay their debts, the three enforcement mechanisms of debtor compliance, and consequences for international crisis management.
Kathryn C. Lavelle
- Published in print:
- 2011
- Published Online:
- January 2012
- ISBN:
- 9780199765348
- eISBN:
- 9780199918959
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199765348.003.0005
- Subject:
- Political Science, International Relations and Politics
This chapter investigates the debt stage in the relationship between Congress and the IMF and World Bank that was triggered by the external shocks of the 1982 Mexican default, subsequent Latin ...
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This chapter investigates the debt stage in the relationship between Congress and the IMF and World Bank that was triggered by the external shocks of the 1982 Mexican default, subsequent Latin American debt crisis, and the end of the Cold War. The chief endogenous change was the increasing use of omnibus legislation in the period of divided government that followed the election of Ronald Reagan. The chapter argues that omnibus bills were effective vehicles for issues related to the IMF and World Bank. Through them, party leaders could secure funding for the IMF and World Bank, yet prevent individual members from having to take a public stand on an individual measure. However, by the end of the stage, the same external changes altered domestic constituencies of support. As the banking industry recovered from the debt crisis and other forms of credit appeared, the money-center banks directed a smaller percentage of transnational capital flows. Congressional advocacy efforts on behalf of environmental activists were directed at the World Bank’s activities. Use of legislative procedure allowed members of Congress to advocate for policy change on issues such as African development, the “Pelosi Amendment,” and the World Bank inspection panel.Less
This chapter investigates the debt stage in the relationship between Congress and the IMF and World Bank that was triggered by the external shocks of the 1982 Mexican default, subsequent Latin American debt crisis, and the end of the Cold War. The chief endogenous change was the increasing use of omnibus legislation in the period of divided government that followed the election of Ronald Reagan. The chapter argues that omnibus bills were effective vehicles for issues related to the IMF and World Bank. Through them, party leaders could secure funding for the IMF and World Bank, yet prevent individual members from having to take a public stand on an individual measure. However, by the end of the stage, the same external changes altered domestic constituencies of support. As the banking industry recovered from the debt crisis and other forms of credit appeared, the money-center banks directed a smaller percentage of transnational capital flows. Congressional advocacy efforts on behalf of environmental activists were directed at the World Bank’s activities. Use of legislative procedure allowed members of Congress to advocate for policy change on issues such as African development, the “Pelosi Amendment,” and the World Bank inspection panel.
Jerome Roos
- Published in print:
- 2019
- Published Online:
- May 2019
- ISBN:
- 9780691180106
- eISBN:
- 9780691184937
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691180106.003.0022
- Subject:
- Business and Management, Public Management
This concluding chapter summarizes key themes and presents some final thoughts. The three in-depth case studies of Mexico, Argentina, and Greece showed how the newfound insistence on full and ...
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This concluding chapter summarizes key themes and presents some final thoughts. The three in-depth case studies of Mexico, Argentina, and Greece showed how the newfound insistence on full and uninterrupted debt service has had far-reaching social implications, leading to a very skewed distribution of adjustment costs between private financiers in the advanced capitalist countries and working people inside the peripheral borrowing countries. The crises in these countries also signaled the start of a new era in international lending; a phase marked by the growing capacity of international creditors to shape the outcomes of major financial disturbances to their own advantage. This has, in turn, greatly undermined the quality of democracy in the debtor states, leading to more intrusive forms of creditor control and greater disregard for established democratic procedures.Less
This concluding chapter summarizes key themes and presents some final thoughts. The three in-depth case studies of Mexico, Argentina, and Greece showed how the newfound insistence on full and uninterrupted debt service has had far-reaching social implications, leading to a very skewed distribution of adjustment costs between private financiers in the advanced capitalist countries and working people inside the peripheral borrowing countries. The crises in these countries also signaled the start of a new era in international lending; a phase marked by the growing capacity of international creditors to shape the outcomes of major financial disturbances to their own advantage. This has, in turn, greatly undermined the quality of democracy in the debtor states, leading to more intrusive forms of creditor control and greater disregard for established democratic procedures.
Ugo Panizza
- Published in print:
- 2010
- Published Online:
- May 2010
- ISBN:
- 9780199578788
- eISBN:
- 9780191723049
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199578788.003.0004
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Development, Growth, and Environmental
This chapter emphasizes that it matters whether domestic debt means debt issued in local currency (at home or abroad) or to local investors (in domestic or foreign currency) or governed by local law ...
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This chapter emphasizes that it matters whether domestic debt means debt issued in local currency (at home or abroad) or to local investors (in domestic or foreign currency) or governed by local law (also in domestic or foreign currency). From the perspective of organizing a debt workout, the governing law is the most important issue, while from an economic sustainability perspective the currency of the obligations is paramount. Indeed, this chapter asks if countries are in fact reducing their risks at reasonable costs. For low‐income countries, external debts are long‐term and carry concessional interest rates, and substituting domestic debt for foreign can be relatively expensive. Local debt generally has a shorter maturity than much of the external debt, and therefore has to be refinanced more frequently, so that countries increase rollover risk as they reduce foreign exchange risk.Less
This chapter emphasizes that it matters whether domestic debt means debt issued in local currency (at home or abroad) or to local investors (in domestic or foreign currency) or governed by local law (also in domestic or foreign currency). From the perspective of organizing a debt workout, the governing law is the most important issue, while from an economic sustainability perspective the currency of the obligations is paramount. Indeed, this chapter asks if countries are in fact reducing their risks at reasonable costs. For low‐income countries, external debts are long‐term and carry concessional interest rates, and substituting domestic debt for foreign can be relatively expensive. Local debt generally has a shorter maturity than much of the external debt, and therefore has to be refinanced more frequently, so that countries increase rollover risk as they reduce foreign exchange risk.
Jerome Roos
- Published in print:
- 2019
- Published Online:
- May 2019
- ISBN:
- 9780691180106
- eISBN:
- 9780691184937
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691180106.003.0020
- Subject:
- Business and Management, Public Management
In March 2012, Greece opened a tender for a voluntary bond exchange in which its private bondholders could swap their securities for a variety of redenominated debt instruments. This chapter ...
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In March 2012, Greece opened a tender for a voluntary bond exchange in which its private bondholders could swap their securities for a variety of redenominated debt instruments. This chapter discusses the lead-up to and outcome of this debt restructuring, showing how the debt swap was specifically designed to spare the biggest private bondholders—EU banks—while leaving Greek taxpayers and pensioners to foot the bill for the subsequent hit taken by their own banks and pension funds. It shows how the debt restructuring of 2012 led to a radical shift in Greece's debt profile and creditor composition: from bonds held by private EU banks to official-sector loans from the EU member states and the IMF. By the end of private sector involvement, both the adjustment costs for the crisis and the risk of a future default had been fully socialized.Less
In March 2012, Greece opened a tender for a voluntary bond exchange in which its private bondholders could swap their securities for a variety of redenominated debt instruments. This chapter discusses the lead-up to and outcome of this debt restructuring, showing how the debt swap was specifically designed to spare the biggest private bondholders—EU banks—while leaving Greek taxpayers and pensioners to foot the bill for the subsequent hit taken by their own banks and pension funds. It shows how the debt restructuring of 2012 led to a radical shift in Greece's debt profile and creditor composition: from bonds held by private EU banks to official-sector loans from the EU member states and the IMF. By the end of private sector involvement, both the adjustment costs for the crisis and the risk of a future default had been fully socialized.
Yujiro Hayami and Yoshihisa Godo
- Published in print:
- 2005
- Published Online:
- October 2005
- ISBN:
- 9780199272709
- eISBN:
- 9780191602870
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199272700.003.0009
- Subject:
- Economics and Finance, Development, Growth, and Environmental
The question of what kind of institutional set-up would be appropriate for promoting economic development is approached in terms of combination between market and state. The traditional debates on ...
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The question of what kind of institutional set-up would be appropriate for promoting economic development is approached in terms of combination between market and state. The traditional debates on the choice of development strategy between free trade and infant industry protection is examined with reference to the historical experiences of developed economies as well as recent confrontations between import substitution industrialization and the IMF-World Bank structural adjustment policies. The nature and significance of market failures versus government failures are illustrated in terms of comparisons between the Latin American Debt Crisis in the 1880s and the Asian Financial Crisis in the 1990s. The choice of the market versus the state, as well as growth versus equity, is discussed in reference to the changing paradigms in the IMF-World Bank.Less
The question of what kind of institutional set-up would be appropriate for promoting economic development is approached in terms of combination between market and state. The traditional debates on the choice of development strategy between free trade and infant industry protection is examined with reference to the historical experiences of developed economies as well as recent confrontations between import substitution industrialization and the IMF-World Bank structural adjustment policies. The nature and significance of market failures versus government failures are illustrated in terms of comparisons between the Latin American Debt Crisis in the 1880s and the Asian Financial Crisis in the 1990s. The choice of the market versus the state, as well as growth versus equity, is discussed in reference to the changing paradigms in the IMF-World Bank.
M. Victoria Murillo
- Published in print:
- 2001
- Published Online:
- November 2003
- ISBN:
- 9780199241149
- eISBN:
- 9780191598920
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199241147.003.0002
- Subject:
- Political Science, Comparative Politics
After the Debt Crisis of 1982, the PRI implemented policies of stabilization and structural reforms although it had previously advanced protectionism and state intervention during the post‐war ...
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After the Debt Crisis of 1982, the PRI implemented policies of stabilization and structural reforms although it had previously advanced protectionism and state intervention during the post‐war period. These reforms triggered processes of industrial restructuring in the private and public sector and challenged the very institutions, which had sustained the historic alliance between unions and the PRI in the aftermath of the Mexican Revolution. Although the majority of Mexican unions were subordinated to the governing party, some unions chose to negotiate or oppose the reforms. This chapter analyses the responses of the Mexican Workers’ Confederation (CTM) and industry‐specific unions in the automobile, education, electricity, oil, and telecommunication sectors, to explain the variation in the responses of Mexican unions. It focuses on the common behaviour of union leaders facing similar challenges linked to structural reform and the resulting exposure to international economic forces. It explains union responses by highlighting the influence of the competition among unions for the representation of workers and the competition among leaders for the control of the union as well as the historical legacies of the PRI‐CTM relationship.Less
After the Debt Crisis of 1982, the PRI implemented policies of stabilization and structural reforms although it had previously advanced protectionism and state intervention during the post‐war period. These reforms triggered processes of industrial restructuring in the private and public sector and challenged the very institutions, which had sustained the historic alliance between unions and the PRI in the aftermath of the Mexican Revolution. Although the majority of Mexican unions were subordinated to the governing party, some unions chose to negotiate or oppose the reforms. This chapter analyses the responses of the Mexican Workers’ Confederation (CTM) and industry‐specific unions in the automobile, education, electricity, oil, and telecommunication sectors, to explain the variation in the responses of Mexican unions. It focuses on the common behaviour of union leaders facing similar challenges linked to structural reform and the resulting exposure to international economic forces. It explains union responses by highlighting the influence of the competition among unions for the representation of workers and the competition among leaders for the control of the union as well as the historical legacies of the PRI‐CTM relationship.
Mohammad A. Razzaque, Philip Osafa‐Kwaako, and Roman Grynberg
- Published in print:
- 2007
- Published Online:
- January 2008
- ISBN:
- 9780199234707
- eISBN:
- 9780191715488
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199234707.003.0010
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter reviews the HIPC debt relief initiative to suggest that unless the commodity price shocks are taken into consideration, many of the beneficiaries may not exit the debt tap. The chapter ...
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This chapter reviews the HIPC debt relief initiative to suggest that unless the commodity price shocks are taken into consideration, many of the beneficiaries may not exit the debt tap. The chapter presents approximate costs of expanding the HIPC Initiative to include all LDCs and SVS, and for considering the declining commodity prices, emphasizing that a permanent solution to the problem of debt crisis lies in the structural shift in composition of the export basket of these countries.Less
This chapter reviews the HIPC debt relief initiative to suggest that unless the commodity price shocks are taken into consideration, many of the beneficiaries may not exit the debt tap. The chapter presents approximate costs of expanding the HIPC Initiative to include all LDCs and SVS, and for considering the declining commodity prices, emphasizing that a permanent solution to the problem of debt crisis lies in the structural shift in composition of the export basket of these countries.
Jerome Roos
- Published in print:
- 2019
- Published Online:
- May 2019
- ISBN:
- 9780691180106
- eISBN:
- 9780691184937
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691180106.003.0012
- Subject:
- Business and Management, Public Management
This chapter takes a closer look at the outcomes of the Mexican debt crisis and the consequences of the reduced state autonomy at the heart of the crisis of the 1980s. The first section considers the ...
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This chapter takes a closer look at the outcomes of the Mexican debt crisis and the consequences of the reduced state autonomy at the heart of the crisis of the 1980s. The first section considers the brief period of tension between Mexican policymakers and their foreign lenders, and discusses Argentina as a counterfactual case in which a democratically elected government came to power that was strongly opposed to debt repayment. The second part of the chapter considers the final resolution of the Mexican debt crisis through the Brady debt restructuring deal of 1989–1990, which, far from constituting a coercive default, was actually undertaken at the initiative of the Wall Street banks with their own interests firmly in mind. Finally, the chapter considers the unequal distribution of adjustment costs inside Mexico as a direct consequence of the creditors' power to shape the outcome of the crisis in their favor.Less
This chapter takes a closer look at the outcomes of the Mexican debt crisis and the consequences of the reduced state autonomy at the heart of the crisis of the 1980s. The first section considers the brief period of tension between Mexican policymakers and their foreign lenders, and discusses Argentina as a counterfactual case in which a democratically elected government came to power that was strongly opposed to debt repayment. The second part of the chapter considers the final resolution of the Mexican debt crisis through the Brady debt restructuring deal of 1989–1990, which, far from constituting a coercive default, was actually undertaken at the initiative of the Wall Street banks with their own interests firmly in mind. Finally, the chapter considers the unequal distribution of adjustment costs inside Mexico as a direct consequence of the creditors' power to shape the outcome of the crisis in their favor.
