Sovereign debt restructuring can be improved – paper

Authors recommend changes to GDP-linked debt and process of loss sharing


Sovereign debt restructuring can be improved by re-weighting loss distribution and linking debt to GDP shrinkage in addition to growth, say researchers with the Federal Reserve Bank of Richmond.

Shorter maturity asset holders generally lose more in instances of sovereign default than holders of longer-term securities, authors Kushal Patel and Horacio Sapriza write.

“Policies that tilt the distribution of creditor losses toward holders of long-term maturities increase welfare by lowering short

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