Evaluating debt repurchases: what are the alternative to investment?

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dc.contributor.author Costa-Cabral, Célia
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Economía
dc.date.accessioned 2008-09-03T10:20:38Z
dc.date.available 2008-09-03T10:20:38Z
dc.date.issued 1993-12
dc.identifier.issn 2340-5031
dc.identifier.uri http://hdl.handle.net/10016/2906
dc.description.abstract In this paper a general model of debt repurchases is built which reconciles most of the points raised in the literature on debt buybacks. It is shown that results previously found in the literature can be obtained from this general model and are strongly dependant on assumptions made on its parameters. The condition that determines whether or not buybacks are an attractive solution from the point of the debtor nations is derived. Additionally it is shown that if there are other assets safer than investment, a debt buyback will always lead to an increase in investment and a reduction in the holdings of such other assets. This result holds independently of the source of the resources used for the buyback, unlike previous suggestions. With a buyback out of current resources, optimal reserves levels fall by more than what is used for the buyback, releasing extra resources for investment purposes, while current consumption does not fall. (JEL F34)
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries UC3M Working Papers. Economics
dc.relation.ispartofseries 1993-43-18
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Debt Overhang
dc.subject.other Debt Repurchases
dc.subject.other Investment Incentives
dc.title Evaluating debt repurchases: what are the alternative to investment?
dc.type workingPaper
dc.subject.eciencia Economía
dc.rights.accessRights openAccess
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