SCID Working Paper 239
The market for developing country sovereign debt has become increasingly competitive. Is this necessarily good for welfare? Or, is there scope for beneficial government intervention to reduce competition, and promote coordination, among creditors? This paper reviews recent theoretical work on the market for developing country sovereign debt that shows that competition can reduce welfare. Further, it argues that while private sector creditor organizations have been successful at coordinating existing creditors in history, government intervention to discourage entry by new creditors may be welfare improving today.