Sovereign Bailouts and Senior Loans [electronic resource] Christophe Chamley
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- World Bank working papers.
- Washington, D.C., The World Bank, 2012
- Policy research working papers.
World Bank e-Library.
- Government document
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- Institutional lending in crisis is evaluated from a theoretical point of view. First, the share of senior loans in new loans is irrelevant under a given probability distribution of the country's resources. Second, seniority may partially alleviate the inefficiency of debt contracts when the distribution of resources is endogenous to the country's physical investment and effort towards success. Third, with multiple lending rate equilibria, institutional lending may induce a switch to a lower private loan rate if it can be done in a sufficiently large amount. Fourth, conditions are analyzed under which debt forgiveness is efficient under a financial shock.
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- Chamley, Christophe
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- Print version: Chamley, Christophe Sovereign Bailouts and Senior Loans.
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- Restricted for use by site license.
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