Abstract
During the last decade, there has been a significant bias towards bond financing on emerging markets, with private investors relying on a bail-out of bonds by the international community. This bias has been a main cause of the recent excessive fragility of international capital markets. The following paper shows how collective action clauses in bonds contracts help to involve the private sector in risk-sharing. It argues that such clauses, as a market-based instrument, will raise the spreads for emerging market debt and so help to correct a market failure towards excessive bond finance. Recent pressure by the IMF to involve the private sector faces a conflict between the principle of honouring existing contracts and that of equal treatment of bondholders.
Item Type: | Journal article |
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Faculties: | Economics Economics > Chairs > Seminar for Macroeconomics |
Subjects: | 300 Social sciences > 330 Economics |
Language: | English |
Item ID: | 19517 |
Date Deposited: | 15. Apr 2014, 08:51 |
Last Modified: | 04. Nov 2020, 13:01 |