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Informal creditors and sovereign debt restructuring
Sayantan Ghosal1, Dania Thomas1
1University of Glasgow, Glasgow, United Kingdom.
Abstract:
A conventional view of sovereign debt restructuring suggests that costly sovereign debt restructuring is required to lower the interest rate charged on it. In the presence of a negative external shock, under certain conditions, we show that (a) debt restructuring leads to interim social welfare gains and ex ante efficiency gains, (b) participation by citizens will lead to efficient debt restructuring. Using our results, we discuss provide a normative case for the proposed UNCTAD Roadmap.
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