Does improving creditor coordination by strengthening CACs lead to efficiency gains in the functioning of sovereign …’s incentives are taken into account, we demonstrate the robust possibility of a conflict between ex ante and interim efficiency. We …

show that the resulting conflict between ex ante and interim efficiency limits the welfare impact of strengthening CACs … welfare gains. However, when ex ante efficiency requires the sovereign debtor to choose actions that reduce the probability of … default, improved creditor coordination reduces ex ante efficiency and the interim efficient CAC threshold is higher than the …