TY  - JOUR
AU  - Friedman,Benjamin M.
TI  - Debt Restructuring
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7722
PY  - 2000
Y2  - May 2000
UR  - http://www.nber.org/papers/w7722
L1  - http://www.nber.org/papers/w7722.pdf
N1  - Author contact info:
Benjamin M. Friedman
Department of Economics
Littauer Center 127
Harvard University
Cambridge, MA  02138
Tel: 617/495-4246
Fax: 617/495-7730
E-Mail: bfriedman@harvard.edu
AB  - What difference does it make, and for whom, whether the nonperforming debts of emerging market borrowers are restructured?  This paper begins by positing a set of counterfactual conditions under which restructuring would not matter, and then shows how several ways in which the actual world of international lending departs from these conditions give both lenders and borrowers ample reason to care whether nonperforming debts are restructured.  One implication of the way in which debt restructuring matters is that restructuring should not be  too' easy.  Further, with a greater frequency of defaults, some credit flows to emerging market countries would not be extended in the first place.  An important element driving this line of argument is moral hazard, but (unlike in much of the recent literature of emerging market debt problems) what is central here is not the availability of credit from the IMF or other official lenders but the more fundamental moral hazard inherent in all uncollateralized borrower-lender relationships.
ER  -