This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

Journal of Economic Perspectives: Vol. 4 No. 1 (Winter 1990)

Expand

Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter

Explore:

JEP - All Issues


A Strategy for Efficient Debt Reduction

Article Citation

Sachs, Jeffrey D. 1990. "A Strategy for Efficient Debt Reduction." Journal of Economic Perspectives, 4(1): 19-29.

DOI: 10.1257/jep.4.1.19

Abstract

Debt reduction, like bankruptcy, needs an institutional setting to bring it about, to overcome an inherent free-rider problem. Even when it is in the collective interests of the banks to reduce the debt, each individual bank is still tempted to insist on full repayment of its own claims, while free riding on concessions made to the debtor by the other banks. The banks have recently come to endorse the idea of "voluntary" debt reduction, in which each individual bank can choose whether to participate in a given debt reduction scheme. The Brady plan similarly has endorsed the concept of voluntary debt reduction. But because of the free rider problem, such voluntary schemes are doomed to failure. A more fruitful course would be the establishment of an International Debt Facility (IDF) to provide the necessary institutional framework for debt reduction. First, I will discuss the profound shortcomings of so-called "voluntary debt reduction" schemes, as now supported by the commercial banks. Second, I will outline the case for an IDF, and try to clear away much of the underbrush of misunderstanding that has slowed the adoption of the proposal.

Article Full-Text Access

Full-text Article (Complimentary)

Authors

Sachs, Jeffrey D. (Harvard U)

JEL Classifications

443: International Lending and Aid (Public

Comments

View Comments on This Article (0) | Login to post a comment


Journal of Economic Perspectives


Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

JEP - All Issues

Virtual Field Journals


AEA Member Login:


AEAweb | AEA Journals | Contact Us