Hares and stags in Argentinean debt restructuring Engelen, Christian; Lambsdorff, Johann Graf

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Engelen, Christian ; Lambsdorff, Johann Graf
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Journal of International Economics
Financial markets -- Analysis; Debt relief -- Analysis; Financial management
To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jinteco.2009.01.015 Byline: Christian Engelen, Johann Graf Lambsdorff Keywords: Sovereign debt restructuring; Coordination failures; Collective action clauses; Exit consents Abstract: The latest Argentinean debt restructuring was the first time the resolution of a modern financial crisis was completely handed over to the private financial markets without official intervention by public institutions. We argue that the resulting harshest haircut for private creditors in history can be at least partially related to a stag-hunt game played by creditors. We show that incentive schemes provided by the Argentinean government were factors facilitating this haircut. The analysis suggests that, contrary to the recognition in the literature, the effects of Collective Action Clauses and Exit Consents within a restructuring process are not equal. In the case of Argentina, the inclusion of Collective Action Clauses in the defaulted bonds could have benefited the holdout creditors. Author Affiliation: University of Passau, Germany Article History: Received 17 April 2006; Revised 6 May 2008; Accepted 26 January 2009 Article Note: (footnote) [star] This article was written at the University of Passau and is thus independent of the official position of Deutsche Bundesbank. The authors can be reached at Innstrasse 27, University of Passau, D-94030 Passau, Germany. For valuable comments and helpful discussions, we are grateful to Bernhard von Stengel, an anonymous referee, the editor and the Brown Bag Sessions at the University of Passau. The authors alone are responsible for any remaining errors.
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