Suchergebnisse

The programs designed by the International Monetary Fund (IMF) during the Global Financial Crisis have shown more awareness of the importance of domestic demand for the prospects of economic recovery. Yet the IMF has continued to do little about the late payments made by governments to domestic creditors and suppliers. In contrast, the greater protection historically awarded by the IMF to foreign creditors has endured throughout the recent crisis. The article suggests that, in order to adequately balance foreign creditor seniority and growth objectives, the IMF may sometimes need to emphasize equitable burden-sharing across categories of creditors rather than privilege the interests of international bond markets. Adapted from the source document.

The programs designed by the International Monetary Fund (IMF) during the Global Financial Crisis have shown more awareness of the importance of domestic demand for the prospects of economic recovery. Yet the IMF has continued to do little about the late payments made by governments to domestic creditors and suppliers. In contrast, the greater protection historically awarded by the IMF to foreign creditors has endured throughout the recent crisis. The article suggests that, in order to adequately balance foreign creditor seniority and growth objectives, the IMF may sometimes need to emphasize equitable burden‐sharing across categories of creditors rather than privilege the interests of international bond markets.

We study theoretically and quantitatively how official lending regimes affect a government's decision to raise saving as opposed to defaulting, and its implication for sovereign bond pricing by investors. We reconsider debt sustainability in the face of both output and rollover risk under two types of institutional bailouts: one based on long-maturity, low-spread loans similar to the ones offered by the euro area official lenders; the other, on shorter maturity and high-spread loans, close to the International Monetary Fund standards. We show that official lending regimes raise the stock of safe debt and facilitate consumption smoothing through debt reduction. However, to the extent that bailouts translates into higher future debt stocks and countercyclical deficits in persistent recessions, they also have countervailing effects on sustainability. Quantitatively, the model is able to replicate Portuguese debt and spread dynamics in the years of the bailout after 2011. We show that, depending on the composition of debt by maturity and official lending, sustainable debt levels can vary between 50% of GDP and 180% of GDP depending on the state of the economy and the conditions for market access. Longer maturities have a stronger effect on sustainability than lower spreads. ; The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.