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From Debt Collection to Relief Provision: 60 Years of Official Debt Restructurings through the Paris Club

Author

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  • Cheng, Gong
  • Díaz Cassou, Javier
  • Erce, Aitor
Abstract
Despite the frequency of official debt restructurings, little systematic evidence has been produced on their characteristics and implications. Using a dataset covering more than 400 Paris Club agreements, this paper aims to fill that gap. It provides a comprehensive description of the evolving characteristics of these operations and studies the economic dynamics surrounding them. The progressive introduction of new terms of treatment gradually turned the Paris Club from a mere debt collector into a sequenced provider of debt relief. The study finds that more generous restructuring conditions involving nominal relief are associated with higher economic growth. In contrast, agreements including only NPV relief have no positive impact on growth. However, the countries that get these restructuring conditions turn out to be more likely to pursue a prudent fiscal policy after the event than those receiving a nominal haircut. In other words, when deciding upon the type of relief to be granted through debt restructuring, the official sector faces a trade-off between the objectives of stimulating growth and fostering fiscal sustainability.

Suggested Citation

  • Cheng, Gong & Díaz Cassou, Javier & Erce, Aitor, 2017. "From Debt Collection to Relief Provision: 60 Years of Official Debt Restructurings through the Paris Club," IDB Publications (Working Papers) 8081, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:8081
    DOI: http://dx.doi.org/10.18235/0000584
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    Cited by:

    1. Gong Cheng & Javier Diaz-Cassou & Aitor Erce, 2019. "The macroeconomic effects of official debt restructuring: evidence from the Paris Club," Oxford Economic Papers, Oxford University Press, vol. 71(2), pages 344-363.
    2. Danny Cassimon & Dennis Essers & Karel Verbeke, 2018. "Sovereign Debt Workouts: Quo Vadis?," Africagrowth Agenda, Africagrowth Institute, vol. 15(3), pages 4-8.
    3. Marchesi, Silvia & Masi, Tania, 2021. "Life after default. Private and official deals," Journal of International Money and Finance, Elsevier, vol. 113(C).
    4. Mark Wright, 2018. "The Seniority Structure of Sovereign Debt," 2018 Meeting Papers 928, Society for Economic Dynamics.
    5. Silvia Marchesi & Tania Masi, 2019. "Sovereign risk after sovereign restructuring. Private and official default," Working Papers 423, University of Milano-Bicocca, Department of Economics, revised Nov 2019.
    6. Sayantan Ghosal & Marcus Miller & Kannika Thampanishvong, 2019. "Waiting for a haircut? A bargaining perspective on sovereign debt restructuring," Oxford Economic Papers, Oxford University Press, vol. 71(2), pages 405-420.
    7. Marchesi, Silvia & Masi, Tania, 2020. "Sovereign rating after private and official restructuring," Economics Letters, Elsevier, vol. 192(C).
    8. Silvia Marchesi & Tania Masi, 2020. "The price of haircuts: private and official default," Development Working Papers 460, Centro Studi Luca d'Agliano, University of Milano, revised 06 Feb 2020.
    9. Scheubel, Beatrice & Tafuro, Andrea & Vonessen, Benjamin, 2018. "Stigma? What stigma? A contribution to the debate on financial market effects of IMF lending," Working Paper Series 2198, European Central Bank.
    10. Silvia Marchesi, 2016. "Life after default? Private vs. official sovereign debt restructurings," Development Working Papers 398, Centro Studi Luca d'Agliano, University of Milano, revised 26 Aug 2016.
    11. Sayantan Ghosal & Marcus Miller, 2019. "Introduction to the special issue on sovereign debt restructuring," Oxford Economic Papers, Oxford University Press, vol. 71(2), pages 309-319.

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    More about this item

    Keywords

    debt relief; debt restructurings; debt sustainability;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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