scholarly journals Sovereign Debt and Structural Reforms

2019 ◽  
Vol 109 (12) ◽  
pp. 4220-4259 ◽  
Author(s):  
Andreas Müller ◽  
Kjetil Storesletten ◽  
Fabrizio Zilibotti
Keyword(s):  
Sovereign Debt ◽  
Optimal Allocation ◽  
Competitive Equilibrium ◽  
Dynamic Theory ◽  
Structural Reforms ◽  
Reform Effort ◽  
Complete Markets ◽  
Debt Overhang ◽  
Limited Enforcement ◽  
Speed Up

We construct a dynamic theory of sovereign debt and structural reforms with limited enforcement and moral hazard. A sovereign country in recession wishes to smooth consumption. It can also undertake costly reforms to speed up recovery. The sovereign can renege on contracts by suffering a stochastic cost. The constrained optimal allocation (COA) prescribes imperfect insurance with non-monotonic dynamics for consumption and effort. The COA is decentralized by a competitive equilibrium with markets for renegotiable GDP-linked one-period debt. The equilibrium features debt overhang: reform effort decreases in a high debt range. We also consider environments with less complete markets. (JEL D82, E21, E23, E32, F34, H63)

scholarly journals Barbados’ 2018–19 Sovereign Debt Restructuring–A Sea Change?

2020 ◽  
Vol 20 (34) ◽  
Author(s):  
Myrvin Anthony ◽  
Gregorio Impavido ◽  
Bert van Selm
Keyword(s):  
Collective Action ◽  
Public Debt ◽  
Sovereign Debt ◽  
Structural Reforms ◽  
Reform Effort ◽  
Action Mechanism ◽  
Debt Restructuring ◽  
Treasury Bills

This paper examines the causes, processes, and outcomes of Barbados’ 2018–19 sovereign debt restructuring—its first ever. The restructuring was comprehensive, featuring several rarely used approaches, including the restructuring of treasury bills, and the use of a retrofitted collective action mechanism. The debt restructuring has helped to set Barbados’ public debt on a clear downward trajectory. A sustained reform effort, maintaining high primary surpluses and ambitious structural reforms, will be needed to gradually reduce public debt from about 160 percent of GDP before the restructuring to the country’s 60 percent debt-to-GDP target.

Conclusion

2018 ◽  
Author(s):  
Nauro F. Campos ◽  
Paul De Grauwe ◽  
Yuemei Ji
Keyword(s):  
Financial Crisis ◽  
Business Cycle ◽  
Sovereign Debt ◽  
Global Financial Crisis ◽  
Debt Crisis ◽  
Structural Reform ◽  
Structural Reforms ◽  
Sovereign Debt Crisis ◽  
The Business Cycle ◽  
The Global Financial Crisis

Structural reform policies move like the business cycle. There are moments when these are implemented with great fervour and others when they are put on the back burner or even dismantled. After the global financial crisis, and in particular the sovereign debt crisis in Europe, many countries were forced by creditor countries or were self-imposed to apply deep reforms to their product markets and especially to their labour markets. Now that Europe is recovering, the pressure to implement structural reforms has abated....

scholarly journals Investment Cycles and Sovereign Debt Overhang

2007 ◽  
Author(s):  
Mark Aguiar ◽  
Manuel Amador ◽  
Gita Gopinath
Keyword(s):  
Sovereign Debt ◽  
Debt Overhang

Omani debt may face further downgrades

2019 ◽  
Keyword(s):  
Sovereign Debt ◽  
Credit Rating ◽  
Oil Prices ◽  
Load Resistance ◽  
Market Demand ◽  
Fiscal Reform ◽  
Content Type ◽  
Rating Agencies ◽  
Fiscal Reforms ◽  
Speed Up

Subject Outlook for Omani debt. Significance Over the last two years, all three major credit rating agencies have cut Oman’s sovereign debt rating to junk status (meaning a rating below BBB-), most recently Moody’s on March 5. This has happened despite strengthening oil prices and positive internal developments, because of a growing debt load, resistance to fiscal reform and governance concerns. Impacts Funds forced to sell Omani bonds, due to their junk status, will buy BBB-rated sovereigns. A pause in Omani bond issuance could raise market demand for similarly rated sovereign issues in the region, such as Bahrain. Negatively rated oil-exporting sovereigns may speed up fiscal reforms to avoid Oman’s fate.

Financial strains put China's economy in jeopardy

2016 ◽  
Keyword(s):  
Economic Growth ◽  
Corporate Governance ◽  
Financial Crisis ◽  
Balance Sheet ◽  
Structural Reforms ◽  
Debt Restructuring ◽  
Content Type ◽  
Debt Overhang ◽  
Governance Practices ◽  
China’S Economy

Subject The risk of a financial crisis in China. Significance A number of scenarios currently playing out in China's financial system have the potential to trigger a financial crisis. Most pressing among these, as with any crisis, is the leverage and its potential to aggravate other factors, especially off-balance-sheet financing. A subtle state-led restructuring of debt is already under way, indicating that officials have grasped some of the lessons of a previous bailout. While this lessens the immediate possibility of a financial crisis, its scale is inadequate to deal with the consequences of the debt overhang. Impacts Currency liberalisation and structural reforms will be postponed in favour of stability. Bad loans are unlikely to reach 1990s levels, but the debt overhang will retard economic growth. Poor corporate governance practices and a failure to reform stock markets will hinder debt restructuring. The fiscal cost of a bailout, were one necessary, would be prolonged over several years, as in the 1998 case.

scholarly journals Investment Cycles and Sovereign Debt Overhang

2009 ◽  
Vol 76 (1) ◽  
pp. 1-31 ◽  
Author(s):  
MARK AGUIAR ◽  
MANUEL AMADOR ◽  
GITA GOPINATH
Keyword(s):  
Sovereign Debt ◽  
Debt Overhang
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