Policy Watch: Debt Relief

Has Debt Relief Made

Liquidity and Feasible Debt Relief∗

This paper analyzes the determinants of secondary debt market liquidity, identifying conditions under which trading in competitive markets results in sufficient ownership concentration to induce ex post efficient debt relief. The feasibility of debt relief is path-dependent, hinging upon interim economic conditions. Secondary debt markets are likely to freeze during recessions, precisely when t...

Liquidity traps, debt relief, and macroprudential policy: a mechanism design approach∗

I present a unified framework to analyze debt relief and macroprudential policies in a liquidity trap when households have private information. I develop a model with a deleveragingdriven recession and a liquidity trap in which households differ in their impatience, which is unobservable. Ex post debt relief stimulates the economy, but anticipated debt relief encourages overborrowing ex ante, m...

Public Debt and Pension Policy

Indicators of the sustainability of fiscal policies play an important role in the conduct of the international surveillance of fiscal policies. The construction of these indicators, however, is beset with serious problems. To illustrate, many authors have observed that conventional measures of public debt are potentially misleading indicators of public wealth and the effects of fiscal policy on...

Debt Relief and the Rule of Thumb: Analytical History of HIPC Debt Sustainability Targets

This paper traces the origins of HIPC debt sustainability targets. These targets are interpreted as ‘switching values’, below which countries are expected to avoid debt service problems, but as such, they do not take into account that countries encounter debt problems for a variety of reasons and at different levels of debt. Most likely the ‘true’ switching value of the debt-to-export ratio of ...