Holdouts in Sovereign Debt Restructuring: A Theory of Negotiation in a Weak Contractual Environment

Abstract

While all errors are our own, we thank Rui Esteves, Daniel Klerman, Lee Ohanian, Christoph Trebesch, the editor, three anonymous referees, and numerous seminar participants for comments, and Catherine Feng and Aubrey Clark for excellent research assistance. Further comments are welcome. Pitchford acknowledges the financial support of the Australian Research Council. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Sovereign Debt Relief and Its Aftermath

“…7 However, a substantial related literature suggests that a default or restructuring can cause reputational damage and trigger sanctions and output losses (e.g., Eaton and Gersovitz 1981;Bulow and Rogoff 1989;Cole and Kehoe 1998;Aguiar and Gopinath 2006;Arellano 2008). In addition, debt relief may reduce the incentives to implement economic reforms (Easterly 2002), and debt renegotiations can give rise to collective action problems and inefficient delays that reduce output (Benjamin and Wright 2009;Pitchford and Wright 2012). Determining the overall (net) impact of debt relief is, in the end, an empirical question.…”

“…5 We also document the process of crisis resolution in detail. Benjamin and Wright (2009), Pitchford and Wright (2012), Aguiar and Amador (2013), Hatchondo et al (2014), Kaminsky and Vega-Garcia (2014), and Asonuma and Trebesch (2016). In addition, a small body of empirical work has shed light on specific debt relief episodes, such as the 16 Brady debt reduction deals of the 1990s (Cline 1989;Rieffel 2003;Arslanalp and Henry 2005), or the debt forgiveness for highly indebted poor countries (HIPCs) (Depretis Kraay 2005, 2007;Dias et al 2013).…”

Sovereign Debt Restructurings: Preemptive or Post-Default

“…Here, we focus on an intermediate outcome: restructurings without default, which occur with surprising frequency. 1 Our theoretical setup is particularly related to papers that model a bargaining game between a sovereign debtor and its creditors (e.g., Bulow and Rogoff 1989;Benjamin and Wright 2009;Kovrijnykh and Szentes 2007;Bi 2008;Bai and Zhang 2010;D'Erasmo 2010;Yue 2010;Pitchford and Wright 2012;Asonuma 2012;Arellano and Bai 2014;and, in particular, Hatchondo et al 2014). Most of these papers simply assume that restructurings are preceded by a default, which is often not true, as shown here.…”

From Today's City to Tomorrow's City: An Empirical Investigation of Urban Land Assembly

“…Other problems of fragmented ownership include the resolution of sovereign debt consolidations (Pitchford and Wright 2008), and the efficient use of multiple related patented discoveries (Heller and Eisenberg 1998).…”