search query: @indexterm solvency / total: 18
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| Author: | Haldane, A.G. Irwin, G. Saporta, V. |
| Title: | Bail out or work out? Theoretical considerations |
| Journal: | Economic Journal
2004 : MAR, VOL. 114:494, p. C130-C148 |
| Index terms: | Finance Liquidity Solvency Crises Theories Models |
| Language: | eng |
| Abstract: | This paper assesses various crisis resolution proposals using a theoretical model of liquidity and solvency crisis. The model suggests that payments standstills and last-resort lending are an equally efficient means of dealing with liquidity crises, while coordinated lending through creditor committees is second-best. Debt write-downs are preferred to subsidised IMF financing when dealing with solvency crises, because of the negative moral hazard implications of the latter tool. Finally, the model suggests that international bankruptcy court proposals may be superiour to existing contractual approaches in securing such write-downs. |
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