The Simple Analytics of Debt-Equity Swaps
Working Paper 2771
DOI 10.3386/w2771
Issue Date
Recent attempts to resolve the international debt crisis have lead some countries to engage in debt-equity swaps. The paper explores conditions under which such transactions are beneficial to the debtor as well as the creditors. It identifies a market failure that may prevent the emergence of actually beneficial swaps and analyzes the effects of swaps on the investment level in the debtor country. The latter helps to evaluate the contribution of this policy to future difficulties with debt service payments.
Published Versions
American Economic Review, Vol. 79, No. 3, pp. 440-451, (June 1989). citation courtesy of