Coordinating Creditors

摘要

In the past three decades, the market for developing economy sovereign lending has grown increasingly competitive. Advances in telecommunications and the removal of capital market regulations have reduced the costs of doing business. At the same time, the shift away from syndicated bank loans towards bonds, illustrated in Figure 1, has opened up the market to larger numbers of investors. In any ordinary market, these developments would be seen as an unquestionably good thing for ordinarily competition promotes the efficient allocation of resources in the economy by forcing firms to price at marginal cost. However, sovereign debt is not traded in an ordinary market as there is no supra-national legal system that can guarantee the enforcement of a contract. And when contracts must be enforced by informal means—such as through a threatened denial of future credit—efficiency ex ante is limited to the extent that creditors can coordinate in imposing punishments ex post. This begs the question: Is there a role for government policy to encourage coordination, and discourage competition, in the market for developing country sovereign debt?