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Overcoming Developing Country Debt Crises$
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Barry Herman, José Antonio Ocampo, and Shari Spiegel

Print publication date: 2010

Print ISBN-13: 9780199578788

Published to Oxford Scholarship Online: May 2010

DOI: 10.1093/acprof:oso/9780199578788.001.0001

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The Political Economy of the SDRM

The Political Economy of the SDRM

(p.317) 12 The Political Economy of the SDRM
Overcoming Developing Country Debt Crises

Brad Setser

Oxford University Press

This chapter examines the IMF effort to create the sovereign debt‐restructuring mechanism (SDRM) and the forces that lined up in favor of and against the proposal. It emphasizes that different stakeholders had rather different ideas of proposals for reforming the workouts from defaults on private creditors. it saw the mainly European creditor governments that supported developing the SDRM as wishing to give debtor countries greater legal protection against their creditors during debt restructuring, thereby reducing the demand for IMF bailout packages (although it finds little connection between the short‐term financial crisis factors that lead to bailouts and the later process for restructuring sovereign bonds). Conversely, emerging economy governments that issue bonds internationally worried that they would in fact lose access to IMF funding in the event of need and they worried what signal the market might read from the creation of a bankruptcy regime, possibly raising the perceived riskiness and thus interest cost of their obligations.

Keywords:   political economy, sovereign debt reform mechanism, IMF, bankruptcy

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