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We introduce long-term debt (and a maturity choice) into a standard model of firm financing and investment. This allows us to study two distortions of investment: (1.) Debt dilution distorts firms' choice of debt which has an indirect effect on investment; (2.) Debt overhang directly distorts investment. In a dynamic model of investment, leverage, and debt maturity, we show that the two frictions interact to reduce investment, increase leverage, and increase the default rate. We provide empirical evidence from U.S. firms that is consistent with the model predictions. Using our model, we isolate and quantify the effect of debt dilution and debt overhang. Debt dilution is more important for firm value than debt overhang. Debt overhang can actually increase firm value by reducing debt dilution. The negative effect of debt dilution on investment is about half as strong as that of debt overhang. Eliminating the two distortions leads to an increase in investment equivalent to a reduction in the corporate income tax of 3.5 percentage points. ; The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.

After the huge debt increases in the 1940s, due to the WWII, and in the 1980s due to the emerging markets' debt crises, the debt overhang problem is once again at the center of the academic and political debate because of the recent debt crisis that affected the European countries in 2009. The debt overhang theory explains how an high level of debt distorts the optimal investment decisions and reduces government's incentives, in the debtor country, to undertake the necessary "adjustment policies". A huge literature focuses on the negative effects deriving from a debt overhang condition. In particular, this kind of literature has been mostly used to describe and to study poor and less developed countries. Nowadays instead, the situation is quite different with the Greek case that represents a very peculiar and never experienced situation. Chapter 1 of the thesis starts with an introduction of the sovereign debt overhang problem. Then, since the aim is to study the possible policy interventions able to solve it, the focus is posed on sovereign debt restructuring as a resolution mechanism. A relief intervention can be considered, indeed, as a way to reduce the debt burden for a country struggling with an high level of debt. Descriptions of the restructuring process, of the macroeconomic consequences and of the Greek case are then provided in this chapter in addition to some stylised facts and an event analysis useful to communicate the main messages. In the past, several different strategies of debt restructuring have been implemented and the consequences they produced were often different case by case. It is then interesting to study the effectiveness of the several options that can be used to restructure public debt. For this reason, a very simple theoretical model is developed in Chapter 2 in order to study three different strategies that can be used to solve a sovereign debt overhang problem. In particular, two strategies are based on a debt restructuring process, via face value reduction or rescheduling, whereas a third one is based on conditional-additional official lending. This strategy relies on the idea that the debtor country can benefit of new lending from the official sector, in order to undertake a larger amount of investment. The aim of the model is to represent schematically the functioning of the three restructuring processes to gain insights into their differences and to study their consequences in term of incentives to invest in a "troubled country". An empirical evidence of the debt overhang hypothesis is then provided in Chapter 3. The combination of the sovereign debt crisis of 2009 and the fiscal consolidation policies implemented as a result, makes indeed interesting to study this hypothesis in Europe. The Chapter exploits then a panel dataset for the European countries, between 1995 and 2015, in order to examine the extent to which increased levels of public debt have led to reduced public investment. We start the analysis from basic POLS models and then we expand it gradually to FE, IV and GMM estimation models. The results validate the debt overhang hypothesis and remain robust across various model specifications.

Cover -- Contents -- 1 Introduction -- 2 A bare-bones model of sovereign debt crises -- 2.1 Optimal default and taxation plans under discretion -- 2.2 Debt pricing -- 2.3 Rational expectations equilibrium and regularity conditions -- 2.4 Equilibria -- 3 The effect of tranching when senior debt is riskless -- 3.1 A Modigliani-Miller irrelevance result -- 3.2 Non-neutrality -- 4 Risky senior debt -- 5 A numerical illustration -- 6 Conclusion -- 7 Appendix -- A Proofs of Propositions -- A.1 Proof of Proposition 1 -- A.2 Proof of Proposition 2 -- A.3 Proof of Proposition 3 -- A.4 Proof of Proposition 4 -- B Equilibria under tranching

For debtors everywhere who want to understand how the system really works, this handbook provides practical tools for fighting debt in its most exploitative forms. Over the last 30 years as wages have stagnated across the country, average household debt has more than doubled. Increasingly, people are forced to take on debt to meet their needs; from housing to education and medical care. The results-wrecked lives, devastated communities, and an increasing reliance on credit to maintain basic living standards-reveal an economic system that enriches the few at the expense of the many. Detailed st

Is the seniority structure of sovereign debt neutral for a government's decision between defaulting and raising surpluses? In this paper, we address this question using a model of debt crises where a discretionary government endogenously chooses distortionary taxation and whether to apply an optimal haircut to bondholders. We show that when the size of senior tranches is small, a version of the Modigliani-Miller theorem holds: tranching just redistributes government revenues from junior to senior bondholders, while taxes and government borrowing costs remain unchanged. However, as senior tranches become sufficiently large, default costs on senior debt transpire into a stronger commitment to repay not only the senior tranche, but also the junior one. We show that there is a lower threshold for senior bonds above which tranching can eliminate default on both junior and senior debt, and an upper threshold beyond which the government defaults also on senior debt. ; The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.

StepChange Debt Charity is the UK's largest debt advice charity, with about 600,000 people contacting them each year and more than 300,000 receiving free, full, independent debt help. StepChange, which was founded in 1993, provides help to people who are struggling with debt through telephone and online programmes, as well as advocates for change to decrease the pain and stigma connected with debt. Stepchange debt management plan reviews is a charity financed by the credit sector that offers free credit counselling to persons in the United Kingdom. It conducts a first telephone or in-person interview before reviewing your debt history and making a recommendation. A debt management plan, which is handled by stepchange dmp review, is one example. further information from- glassdoor stepchange Types of debt solutions Possibility to improve the industry We are collaborating closely with the credit sector and the government to exploit the sector's prospects and manage its issues – financial, operational, and demand-driven – with other debt advisory charities. It is within our grasp to see a smoother and more efficient citizen advice sector, in which multiple delivery models – face-to-face, telephone, online, supported self-help, and intensively supported for vulnerable clients – all thrive under a stable and sustainable funding system that recognises the increasing roles and responsibilities of devolved national governments, Westminster, and the credit sector. What happens during a review of a DMP? Typically, in a review, we'll; Discuss how you're doing with sticking to a budget, make any required changes, and make sure you and your family have enough money to get by. Just call for free debt help by UK experts 03338803165 Boosting your earnings You could be in debt if you're not getting all of the money you're entitled to, such as: If you're eligible for tax credits, make sure you're not paying too much in taxes. Make sure you're collecting all of your benefits, and that any family or friends who live with you are ...

International debt rescheduling, both in earlier epochs and our present one, has been marked by a flurry of bargaining. In this process, significant variation has emerged over time and across cases in the extent to which debtors have undertaken economic adjustment, banks or bondholders have written down debts, and creditor governments and international organizations have intervened in negotiations. Debt Games develops and applies a situational theory of bargaining to analyze the adjustment undertaken by debtors and the concessions provided by lenders in international debt rescheduling. This approach has two components: a focus on each actor's individual situation, defined by its political and economic bargaining resources, and a complementary focus on changes in their position. The model proves successful in accounting for bargaining outcomes in eighty-four percent of the sixty-one cases, which include all instances of Peruvian and Mexican debt rescheduling over the last one hundred and seventy years as well as Argentine and Brazilian rescheduling between 1982 and 1994

Indonesia has received external debt as an external source of finance to fill in the investment-saving gap in achieving economic growth to improve social welfare. Despite Indonesian economy is able to recover to some extent, based on Bank Indonesia (2018), Indonesia's external debt at the end of Q2/2018 still amounted to USD 355,7 billion; consisting of government and central bank external debt of USD 179.7 billion, as well as private sector (including state-owned enterprises) external debt of USD 176.0 billion. Therefore, this study aims to examine the trend and impact of external debt on economic growth in the context of Indonesia's economy. If external debt is found to lead to debt trap, or already in the condition of growth-led debt, its benefits for economic development should be reviewed properly and government policies regarding external debt need to be redesigned. This study is a qualitative research in the form of case study of External Debt and its critical impact in Indonesia. Through observation, data comparison and literature study, it is found that external debt of Indonesia has been dominated by US Dollar and Japanese Yen, which assumed to cause surge in debt repayment.

The Great Recession has sent debt levels to a post-WWII high for several advanced economies, reviving the discussion of fiscal consolidation. This paper assesses the macroeconomic implications of tax-based versus spending-based consolidation within the framework of a New Keynesian model with long term government debt. Three results stand out: First, tax-based consolidations are inflationary whereas spending-based ones are deflationary. Second, the net benefits of inflation increase in the average maturity of outstanding debt: inflation revalues debt more efficiently, while distortions due to price dispersion remain unaffected - the maturity effect. Third, as a result, tax-based consolidations can become superior to spending cuts if the average maturity is high enough. Quantitatively, the threshold is two years for US data in 2013. The previous mechanism illustrates the importance of inflation in the consolidation process, even if raising its target rate is considered not to be an option.

Restoring a country's debt to a sustainable path after a sovereign debt restructuring is key to ensuring a credible and durable exit from the crisis. In recent years, a number of countries have restructured their sovereign liabilities, either following a default, or preemptively, to avoid a default. This Occasional Paper takes stock of the experiences of some of these countries--Argentina, the Dominican Republic, Ecuador, Moldova, Pakistan, Russia, Ukraine, and Uruguay--with debt-restructuring operations, with a view to assessing the outcomes and whether debt sustainability has been restored

"Examines the relationship between rhetoric and debt, arguing that they are fundamentally entangled in producing and disciplining who is deemed worthy of credit and how debt materializes differentially: as a credit to some and condemnation of others"--

We study debt mutualisation in the Euro area. Bearing in mind other existing proposals we provide an alternative Blue, Yellow and Red Bonds proposal: blue, would cover debt up to 60% of GDP, yellow would include debt from 60% up to 90% of GDP, and red would cover debt above 90% of GDP. Although not with joint liability, the rationale behind the Yellow Bonds with a joint issuance is the attraction of liquidity, which would be beneficial, especially for the countries with high yields. This could give more room to public authorities.

We model and calibrate the arguments in favor and against short-term and long-term debt. These arguments broadly include: maturity premium, sustainability, and service smoothing. We use a dynamic equilibrium model with tax distortions and government outlays uncertainty, and model maturity as the fraction of debt that needs to be rolled over every period. In the model, the benefits of defaulting are tempered by higher future interest rates. We then calibrate our artificial economy and solve for the optimal debt maturity for Brazil as an example of a developing country and the U.S. as an example of a mature economy. We obtain that the calibrated costs from defaulting on long-term debt more than offset costs associated with short-term debt. Therefore, short-term debt implies higher welfare levels.

Intro -- FEDERAL DEBT, INTEREST COSTS AND THE DEBT LIMIT -- FEDERAL DEBT, INTEREST COSTS AND THE DEBT LIMIT -- Library of Congress Cataloging-in-Publication Data -- CONTENTS -- PREFACE -- Chapter 1: FEDERAL DEBT AND INTEREST COSTS -- INTRODUCTION -- SUMMARY -- Debt Held by the Public -- Other Measures of Federal Debt -- Interest Payments and Receipts -- DEBT HELD BY THE PUBLIC -- Trends in Debt Held by the Public -- Types and Amounts of Treasury Debt Held by the Public -- Marketable Securities -- Auctions -- Borrowing Schedule -- Bills -- Notes -- Bonds -- Treasury Inflation-Protected Securities -- Maturity -- Seasonality -- Nonmarketable Securities -- Savings Bonds -- EE/E Bonds -- Other Types of Savings Bonds -- State and Local Government Series -- Thrift Savings Plan -- Zero-Coupon Bonds and Other Nonmarketable Securities -- Reasons for Borrowing Other than Budget Deficits -- Credit Programs -- Student Loans -- Purchases of Mortgage-Backed Securities -- Supplementary Financing Program -- Other Factors Affecting the Treasury's Borrowing -- Ownership of Federal Debt Held by the Public -- Domestic Ownership -- Foreign Ownership -- U.S. Debt Compared with that of Other Countries -- OTHER MEASURES OF FEDERAL DEBT -- Debt Held by the Public Net of Financial Assets -- Cash -- Credit Programs -- Gross Federal Debt -- Debt Subject to Limit -- What the Debt Limit Covers -- Options for the Treasury When Debt Approaches the Limit -- Suspending Sales of Nonmarketable Securities -- Trimming or Delaying Auctions of Marketable Securities -- Suspending Issuance of Maturing Cash Management Bills in the Supplementary Financing Program -- Suspending Flows and Redeeming Securities in Government Accounts -- Swapping Debt with the Federal Financing Bank -- Consequences of Having a Limit on Debt -- INTEREST PAYMENTS AND RECEIPTS