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Playing with FireDeepened Financial Integration and Changing Vulnerabilities of the Global South$
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Yilmaz Akyüz

Print publication date: 2017

Print ISBN-13: 9780198797173

Published to Oxford Scholarship Online: July 2017

DOI: 10.1093/oso/9780198797173.001.0001

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Crisis Management and Resolution

Crisis Management and Resolution

Chapter:
(p.152) 5 Crisis Management and Resolution
Source:
Playing with Fire
Author(s):

Yilmaz Akyüz

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198797173.003.0005

This chapter argues that the conventional approach to the management and resolution of external financial crises in emerging economies is inefficient and inequitable and needs to be reformed. Such reforms need to account for increased complexities arising from deepened integration, notably the difficulties in differentiating between external and domestic debt in terms of their holders, currency denomination, and governing laws. Effective debt resolution mechanisms would be needed to bail-in creditors whether the crisis is one of liquidity or solvency, or due to private or sovereign debt, or locally or internationally issued external debt, particularly since crises caused by excessive private borrowing lead to large increases in public debt. Debt workouts should include temporary standstills, protection against creditor litigation, lending into arrears and debt restructuring and combine statutory and voluntary elements, including collective action clauses, duly reformed to avoid the kind of predicaments encountered during the Argentinian restructuring.

Keywords:   liquidity crisis, solvency crisis, debt workouts, temporary standstills, bail-in, bail-out, lending into arrears, collective action clauses

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