A model is developed to argue that an entrant can use noncallable convertible debt to avoid predation in a "deep pocket" predatory game. Adverse-selection problems force the entrant to enter the market heavily leveraged compared to the incumbent monopolist. The model demonstrates that there exist conversion ratios for which creditors only have incentive to convert if the entrant is high quality. The entrant can therefore issue convertible debt to signal quality to investors. Before production decisions are made, the creditors convert, preventing predation. The conclusions are relevant to both the convertible debt literature and the product market competition literature.
AbstractRecent jurisdictional decisions suggest that sovereign debt will be subject to bilateral investment treaties (BITs) for the foreseeable future. This Article argues that applying BITs to sovereign bonds threatens to undermine the core economic function of those treaties by encouraging inefficient state and creditor behavior and raising the overall cost of sovereign debt. It further argues that this concern can be addressed through an interpretative approach that leads to the equal treatment of like creditors.
AbstractThis paper examines the effect of the external debts of less developed countries (LDCs) on their exports to the United States. Specifically, the effect that manifests as pressure on the 48 most indebted LDCs to export to the US is investigated. Cross‐ sectional regression analysis and data for 1984 are used in the estimation. The estimates show that the burden of external debts put significant pressure on LDCs to export. The estimates also suggest that the LDCs are conscious of their creditworthiness in the international financial market. Furthermore, the results highlight the inadequacy of the current General Agreement on Tariffs and Trade (GATT) negotiations that focus on trade in goods and services to the exclusion of the LDCs' debt problem. GATT negotiations should give LDCs' market access to industrialized countries greater weight on its agenda as an attempt at tackling the LDCs' debt problem. This is necessary for the long‐term growth of these LDCs, a concern to which enough attention has not been paid. In addition, Western donor countries and their banks should provide more debt relief to these debtor countries. This will enable LDCs to retain a substantial part of their export earnings. Uncertainty is reduced, thus providing the much‐needed impetus for entrepreneurs in these poor economies to commit themselves to long‐term investments. This will guarantee long‐term economic growth.
Problems of the utmost concern that are often faced by both developing and developed countries are those of inflation, the budget deficit and the accumulated public debt. It is believed that the main reason for high inflation in most developing countries and countries with transition economies is the financing of the budget deficit by seigniorage. This means that in most such cases it is the budget deficit that is responsible for high inflation. From time to time tensions that had accumulated in the fiscal sphere and mistakes that had been made in monetary policy have serious consequences, such as hyperinflation or a debt crisis. The government and the central bank are interconnected by a consolidated public sector budget constraint: the operational deficit of the budget is financed by new borrowings and by seigniorage. On one hand, the central bank, which controls money emission, has an important goal to achieve, namely a low and stable level of inflation. On the other hand, the central bank must also be concerned about the stability of the financial system, and in particular about the sustainability of the public debt. This means that, even given the central bank's formal independence of the government, the former must nevertheless take into account problems in the fiscal sphere and cover a certain part of the budget deficit by seigniorage. In other words, the policies of the government and of the central bank interact with each other. This work covers a series of questions which are of principle concern in the analysis of the interaction between fiscal and monetary policies.
Serbia had, when started its process of European integration in 2000, relatively high level of external debt amounting to 132% of GDP. All liabilities were practically inherited Government external debt since private sector during the period before 2000 even did not have the opportunity to take credits abroad. After the regime was changed, significant part of the liabilities was written off. In that position, country was thirsty for new capital resources and private sector indebtedness rise was not surprising. Moreover, it was one of the preconditions for future economic development. Even Central Government was in position to take credits under relatively favourable conditions in order to finance infrastructure projects and support structural economic reforms. Unfortunately, after ten years of transition structural reforms did not performed and external debt continued to increase dynamically reaching at the end of 2010 disturbing 84.9% of GDP and 236.2% of total annual export. After the slight stagnation during the crisis, external debt continued its rise dominantly as a consequence of rising Government debt. Current situation should attract the attention of the economic policy makers. Further external debt increase may jeopardize macroeconomic stability as well as the process of economic integration since it is expected that European Union will carefully observe macroeconomic situation in potential member states, especially after the PIGS countries phenomenon.
A review essay on a book by Susan George, A Fate Worse Than Debt (Harmondsworth: Penguin, 1988 [see listing in IRPS No. 52]). George examines the Third World (TW) debt crisis from the perspective of debtor nations, portraying debt as a double negative for the TW: (1) accelerating the transfer of wealth from poor nations to rich, thus exacerbating TW poverty & hunger; & (2) unifying the international financial system, thus aiding its efforts to control TW nations. Injustices of the international financial system are documented, with particular attention given to the role that high US interest rates play in furthering the TW crisis, since US rates set the standard for the high rates TW debtor nations pay their creditors. Potential solutions, such as debt repudiation, are discussed & dismissed; the conclusion is drawn that economic systems must be revamped to rely less on mechanisms of the market & more on maximizing welfare. D. Generoli
In many cases, the dire situation of public finances calls into question the very soundness of sovereigns and prompts corrective actions with far-reaching consequences. In this context, European authorities responded with several measures on different fronts, for instance by passing the "Fiscal Compact", which entered into force on January 1, 2013. Of critical importance in this framework is the assessment of a country's situation by way of statistical measures, in order to take corrective actions when called for according to the letter of the law. If these statistics are not correct, there is a risk of imposing draconian measures on countries that do not really need it.
Background: With the rapid development of economy, depression disorder is not only a public health issue but also a socioeconomic problem and attracting more and more attention in China. Aims: The target of this study is to examine the prevalence of depression and the related risk factors in the Dibao population in northwestern China. Method: A cross-sectional analysis in a random sample survey conducted in three northwestern Chinese cities in 2007. The data from 4459 respondents with completed Center for Epidemiological Studies–Depression (CES-D) scales were evaluated to explore the key risk factors for depression. Using depression as a binary variable according to the cutoff of the CES-D score and then as a continuous variable, multiple logistic and line regression analysis were performed to compare the odds ratio and the weight of different risk factors for depression. Results: The prevalence of depression in non- Dibao population was 34.7% but that in the Dibao population was 50.0% ( p < .001). After adjusting for important confounders, Dibao population had an odds ratio (OR) of 1.38 (95% confidence interval (CI): 1.16–1.63) to have possible depression compared to those non- Dibao people. Furthermore, depression was associated with a higher OR of indebtedness (OR: 1.59, 95% CI: 1.31–1.93), and a small amount of debt would increase the possibility of depression for Dibao people (OR: 1.69, 95% CI: 1.28–2.23). In addition, gender, body mass index (BMI), tobacco use and social network were also important risk factors for depression in the Dibao population. Using depression as a continuous variable, being a member of the Dibao population and being indebted will add 2.06 and 1.83 to the CES-D score, respectively, compared with the non- Dibao population and not being indebted. A comparison of the odds ratios of depression between the Dibao and the non- Dibao population showed that factors such as gender, BMI, tobacco use, social network and indebtedness were statistically significant in the Dibao population but were not statistically significant in the non- Dibao population. Additionally, having a savings account was statistically significant in the non- Dibao population but not in the Dibao population. Conclusions: It was not surprising, as proved by other studies, that gender, obesity and social network were risk factors associated with depression in the Dibao population. Our findings indicated that a small amount of indebtedness was also closely related to depression in the Dibao population.
