Buybacks, Exit Bonds, and the Optimality of Debt and Liquidity Relief / Kenneth A. Froot.

Format:

Book

Author/Creator:

Froot, Kenneth A.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2675.

NBER working paper series no. w2675

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1988.

Summary:

We compare various forms of market-based debt relief with coordinated debt forgiveness on the part of creditors. These schemes lead to different allocations of resources and levels of debtor and creditor welfare, but all attempt to stimulate debtor investment through reductions in the level of debt. If investment-incentive effects are present, then investment in liquidity-constrained debtors will respond by enough to make a reduction in debt profitable, but not by enough to make the reduction in debt optimal. For these countries the optimal debt-relief package (from the creditors perspective) will include an infusion of new lending.

Notes:

Print version record

August 1988.