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Conditionality and debt relief (Inglês)

Six years into the debt crisis, questions about the relevance of policy measures to alleviate the crisis still abound. Conditionality by international financial institutions and rescheduling by commercial creditors have been dismissed in favor of debt reduction as strategies for restoring the creditworthiness of heavily indebted countries. This paper argues that the combination of conditionality and new private money - if properly interpreted and correctly implemented - should not be dismissed too lightly. The paper contends that liquidity (the availability of current resources) in the debtor country is probably as important an incentive for a country to invest and adjust as having a small enough debt stock outstanding. Debt reduction alone, is not as efficient as simultaneously providing liquidity and debt reduction if liquidity were available. The combination of new money and conditionality will work if the debt stock is small enough and enough new money is available.

Detalhes

  • Autor

    Claessens,Constantijn A. Diwan, Ishac

  • Data do documento

    1989/06/30

  • TIpo de documento

    Documento de trabalho sobre pesquisa de políticas

  • No. do relatório

    WPS213

  • Nº do volume

    1

  • Total Volume(s)

    1

  • Data de divulgação

    2010/07/01

  • Nome do documento

    Conditionality and debt relief

  • Palavras-chave

    efficiency gain;marginal productivity of capital;debt relief;debtor country;highly indebted country;world interest rate;investment level;provision of liquidity;amount of debt;domestic private sector;international financial system;favor of debt;classification of debtors;amount of loan;cost of capital;incentive compatibility constraint;open trade regime;per capita consumption;international economics;terms of trade;amount of investment;effect of debt;international interest rate;moral hazard risk;financial sector reform;forms of debt;share of output;loans to country;amount of liquidity;return on investment;welfare level;outstanding debt;conditionality;debt crisis;liquidity constraint;investment opportunities;large debt;future debt;original debt;reservation utility;debt problem;binding constraint;utility level;initial debt;current consumption;net return;liquidity considerations;bargaining process;domestic investment;free-rider problem;multilateral loan;conditional lending;full repayment;debt subordination;optimal choice;liquidity preference;multilateral institution;world trade;simple model;marginal return;foreign debt;debt repayment;productive resource;market force;credible commitment;gross return;repayment obligation;neoclassical economist;international loan;future return;efficiency improvement;debt service;economic reform;rational expectation;higher consumption;indifference curve;production function;lower debt;debt outstanding;investment program;increased investment;international debt;financial concern;negative externality;asymmetric information;strategic investment;domestic debt;Social Welfare;domestic bond;marginal incentive;private debt;financial benefit;market base;domestic currencies;debt buyback;debt conversion;net output;tax effect;domestic lender;credit ceiling;corporate finance;resource constraint;public good;incentive effect;supply constraint;saving decisions;foreign obligation;external borrowing;large loans;optimal investment;consumption decision;marginal rate;optimization problem;foreign lender;opportunity cost;contract curve;consumption change;public policy;total debt;macro economic;debt obligation;equilibrium allocation;Contractual obligations;lending institution;exogenous supply;enterprise restructuring;Fiscal Reform;discount factor;inefficient behavior;net transfer;higher growth;important policy;research topic;capital flight;open economy;international good;real income;credit market;central planner;welfare function;foreign creditor;liquidity crisis;commercial creditor;external creditor;private money;external developments;trade financing;economic investment;private finance;policy regard;creditor country;senior loan;Economic Policy;external factor;

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