Abstract:This paper proposes that an International Monetary Fund (IMF) policy shift was the reason behind major changes in sovereign debt negotiation outcomes observed in 1989. The new policy, in marked departure from past policy, allowed the IMF to lend to nations in default. The paper highlights the stark improvements in debt forgiveness and post-negotiation debt servicing ability coincident with the IMF policy shift. A theoretical framework is proposed in which the IMF policy shift causes the observed changes in neg… Show more
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