Structuring and Restructuring Sovereign Debt: The Role of Seniority-super-1
We show how the willingness-to-pay problem and lack of exclusivity in sovereign lending may result in an equilibrium sovereign debt structure that is excessively difficult to restructure. A bankruptcy regime for sovereigns can alleviate this inefficiency but only if it is endowed with far-reaching powers to enforce seniority and subordination clauses in debt contracts. A bankruptcy regime that makes sovereign debt easier to restructure without enforcing seniority may decrease welfare. Copyright Copyright © 2009 The Review of Economic Studies Limited.
Year of publication: |
2009
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Authors: | BOLTON, PATRICK ; JEANNE, OLIVIER |
Published in: |
Review of Economic Studies. - Wiley Blackwell, ISSN 0034-6527. - Vol. 76.2009, 3, p. 879-902
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Publisher: |
Wiley Blackwell |
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