Argentina set a new historical mark in 2002, having experienced the largest debt default by any country ever. In order to understand how Argentina could go from one of the most developed countries of the Third World, to experiencing the crisis of 2001 and then enter a depression in 2002 with over half the population living in poverty, requires an evaluation of the last quarter century of econom...

The East Asian crisis of 1997-99 was essentially the external debt problems between financial institutions in both host and recipient countries, while the crises in other emerging market economies—such as Russia (1998), Brazil (1999) and Argentina (2001)—were associated with the external debt problems between sovereign borrowers and private investors. Although both crises were triggered by a re...

In his basic model of debt renegotiation, BESTER [1994] argues that collateral is more effective if high risk projects are financed. This result, however, crucially depends on the definition of risk. Using the second-order stochastic dominance criterion introduced by ROTHSCHILD AND STIGLITZ [1970], we show that it is not a project’s high risk, induced by a high probability of default, that make...

Duffie and Lando (2001) were the first to show, under a structural framework, how opacity is priced into credit risk. However, their model is shown to produce results conflicting intuition and empirical observations. In the first part of this study, we propose a biased information model that incorporates skewness into the conditional asset density function. In the second part, we validate our m...

In this paper we examine whether variation in investors’ demand for risky assets is associated with recoveries on defaulted debt securities. Our examination is motivated by the prediction of standard portfolio separation theorems that an increase in aggregate investor risk aversion is associated with a decrease in the demand for the market portfolio of risky assets. Motivated by this prediction...

This study aims to investigate the effect of the Twin Deficits, i.e., deficit of government budget, and deficit in current account, on the foreign debt in Jordan during the period 1977 – 2004. A four variables cointegration analysis with the variables: outstanding foreign debt, budget deficit, current account balance proxied by its index, and gross fixed capital formation were exploited. Dicky-...

This article examines the undemocratic process of telecommunications divestment in Jamaica and Trinidad and Tobago. The divestment of the telecommunications sector was largely prompted by each state’s inability to service external debt. Despite espousing the importance of public participation in the ownership of state-owned enterprises being divested, the governments each limited or excluded na...

A quantitative framework is developed to bring forward the insurance motive for holding international reserves. The insurance value of reserves is quantified as the market price of an equivalent option that provides the same insurance coverage as the reserves. This quantitative framework is applied to calculating the cost of a regional insurance arrangement (e.g. an Asian Monetary Fund) and to ...

Default on sovereign debt is a form of political risk. Issuers and creditors have responded to this risk both by strengthening the terms in sovereign debt contracts that enable creditors to enforce their debts judicially and by creating terms that enable sovereigns to restructure their debts. These apparently contradictory approaches reflect attempts to solve an incomplete contracting problem i...

Poverty can be defined as the inability to achieve a certain minimal standard of living. With the severe economic shocks that rocked the Nigerian economy during the early 1980s came real and perceived increases in the level of poverty in the country. Among the factors contributing to the shocks were declining prices of oil, the country's main export, and rises in real international interest rat...