Debt Relief: What Do the Markets Think?
51 Pages Posted: 6 Dec 2002 Last revised: 8 Aug 2022
Date Written: December 2002
Abstract
The stock market appreciates by an average of 60 percent in real dollar terms when countries announce debt relief agreements under the Brady Plan. In contrast, there is no significant increase in market value for a control group of countries that do not sign agreements. The results persist after controlling for IMF agreements, trade liberalizations, capital account liberalizations, and privatization programs. The stock market revaluations forecast higher future net resource transfers and GDP growth. While markets respond favorably to debt relief in the Brady countries, there is no evidence to suggest that current debt relief efforts for the Highly-Indebted Poor Countries (HIPCs) will achieve similar results.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Would Collective Action Clauses Raise Borrowing Costs?
By Barry Eichengreen and Ashoka Mody
-
Financial Crises and Reform of the International Financial System
-
Bankruptcy Procedures for Sovereigns: A History of Ideas, 1976-2001
-
Structuring and Restructuring Sovereign Debt: The Role of Seniority
By Patrick Bolton and Olivier Jeanne
-
Structuring and Restructuring Sovereign Debt: The Role of Seniority
By Patrick Bolton and Olivier Jeanne
-
Structuring and Restructuring Sovereign Debt: The Role of a Bankruptcy Regime
By Patrick Bolton and Olivier Jeanne
-
Sovereign Bonds and the Collective Will
By Lee C. Buchheit, Mitu Gulati, ...
-
Exit Consents in Sovereign Bond Exchanges
By Lee C. Buchheit and Mitu Gulati