Excess Returns on Emerging Market Bonds and the Framework for Sovereign Debt Restructuring
This chapter looks at the debt restructurings during the period in the context of the development of the overall international market for bonds issued by developing (or emerging market) countries. It assesses the outcome of the international process for sovereign debt workouts, not by analyzing traditional debt ratios and debt sustainability models, but by looking at the flipside: how much creditors were able to recover on their investments when restructurings took place, and how the debt workout process affected risk sharing between the debtor and its creditors. The chapter starts by observing that—with a few notable exceptions (such as Argentina and Russia, discussed below)—most of the restructurings during this period were considered successful because the processes were relatively quick and orderly. However, few of these agreements actually reduced the countries' debt burdens to a significant degree. It finds a marked difference between the cooperative and non‐cooperative debt workout cases.
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