TY  - JOUR
AU  - Fernandez,Raquel
AU  - Rosenthal,Robert W.
TI  - Sovereign-debt Renegotiations:  A Strategic Analysis
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2597
PY  - 1988
Y2  - June 1988
UR  - http://www.nber.org/papers/w2597
L1  - http://www.nber.org/papers/w2597.pdf
N1  - Author contact info:
Raquel Fernández
Department of Economics
New York University
19 West 4th Street, 6th Floor
New York, NY  10012
Tel: 212/998-8908
Fax: 212/995-4186
E-Mail: raquel.fernandez@nyu.edu
AB  - The process of debt-rescheduling between a creditor and a sovereign (LDC) debtor is modeled as a noncooperative game built on a one-sector growth model. The creditor's threat to impose default penalties is ignored here as inherently incredible; instead, the debtor's motivation for repayment is to reap benefits from attaining an improved credit standing in international capital markets. The creditor can forgive portions of the outstanding debt so that a real-time bargaining process results with concessions being in the form of debt-service payments by the debtor and debt forgiveness by the creditor. Subgame-perfect equilibria of the game are characterized the main finding is that these all result in Pareto optima in which the creditor extracts all the surplus.
ER  -