Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/230324
Authors: 
Arnold, Theresa
Gulati, Mitu
Panizza, Ugo
Year of Publication: 
2019
Series/Report no.: 
Graduate Institute of International and Development Studies Working Paper No. 18-2019
Abstract: 
Countries with large debts stocks are vulnerable to the vagaries of the markets. Confidence crises can arise out of nowhere, constricting access to the markets. Hence, the question arises as to whether these countries should put in place mechanisms that will help them better prepare for the possibility of crisis. In effect, the choice is whether to buy insurance. The cost of buying such insurance is that the possibility that markets will see the sovereign's proactive steps to protect against a crisis not as an indication of prudent governance but rather as an indicator that a crisis is imminent. In this article, we use the case of a hypothetical euro area country (Italy) with a large debt stock and a known vulnerability to confidence crises to set forth its options, as of 2019, to anticipate a possible future debt restructuring. It can: do nothing, do a little; and do something substantial.
Subjects: 
Sovereign debt
Italy
euro area
restructuring
local law advantage
JEL: 
F34
F54
G15
H12
H63
K22
Document Type: 
Working Paper

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