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Evolution of the Financial System: Collective Action Clauses and Sovereign Debt Restructuring


In January 2003 the Economic Journal published the paper by Ghosal and Miller on ‘Creditor Co-ordination, Moral Hazard and Sovereign Bankruptcy Procedures’, which shows the inefficiency of market solutions and the potential gains of institutional change. It argues that a Sovereign Debt Restructuring Mechanism, along the lines proposed by the IMF, could achieve more than the voluntary modification of existing contracts. These ideas were further discussed in a report written for the Working Group on EU-Mercosur Negotiations (coordinated by the Chaire Mercosur of Sciences Politiques in Paris), and presented at a conference in Rio de Janeiro, April 2003. Debating these issues was a key feature of the CSGR Annual Conference, discussed in detail below.

At the Royal Economic Society conference 2003 a paper by Miller, Thampanishvong and Zhang was presented which discussed sovereign spreads in Brazil, looking at both contagion (from Argentina) and political risk (over Mr. Lula da Silva). It has been circulated as a CEPR DP and a CSGR WP.

The Economics Department Summer Workshop was held in July 2003 and focussed on ‘Capital Account Liberalisation: Theory and Policy’ and featured papers by Boon and Ghosal, Fronti, Miller and Zhang, and Castren and Miller. Other papers on this theme were presented at the CSGR Annual Conference held in the middle of the Workshop, see below. This research continues to be supported under the aegis of ESRC project: Moral Hazard and Financial Institutions (R000239216).


Zhang, Lei and Marcus Miller (2003) “Sovereign Liquidity Crises: the Strategic Case for a Payments Standstill”. (Reprinted from the Economic Journal). In Vinod Aggrawal and Brigitte Granville (eds.): Sovereign Debt: Origins, Crises and Restructurings. London: Chatham House.

Miller, Marcus (2003) “Postscript : sovereign debt restructuring : new articles, new contracts - or no change?” (Reprinted from the IIE , Washington DC). In Vinod Aggrawal and Brigitte Granville (eds.): Sovereign Debt: Origins, Crises and Restructurings. London: Chatham House.

Kumar, Mohan and Marcus Miller (forthcoming, 2003) “Bail outs, Bail ins and Bankruptcy: Evolution of the New Architecture”. In G Underhill and X Zhang (eds.): International Financial Governance under Stress. Cambridge: Cambridge University Press.

Ghosal, S. and Marcus Miller (April 2003) “Co-ordination Failure, Moral Hazard and Sovereign Bankruptcy Procedures”. Economic Journal, 113, .

Driffill, J. and Marcus Miller (2003) “No Credit for Transition: European institutions and German unemployment” (with J. Driffill). Scottish Journal of Political Economy, 50, 1, 41-60.

Ghosal, S. and Marcus Miller (2003) “Coordination failure, moral hazard and sovereign bankruptcy procedures”, CEPR Discussion Paper No.3729 (February, 2003) . Also circulated as CSGR WP No. 112/03

Thampanishvong, Kannika, Marcus Miller and Zhang, Lei (2003) “Learning to forget? Contagion and political risk in Brazil” (with Kannika and Lei Zhang). CEPR Discussion Paper, No. 3785 (March 2003). Also circulated as CSGR WP No. 113/03

Miller, Marcus (2003) Discussion of “Exchange rate regimes in theory and practice” by Andrew Crockett and “Is foreign exchange intervention effective?” by Takatoshi Ito. In Paul Mizen (ed.), Monetary History, Exchange Rates and Financial Markets: Essays in Honour of Charles Goodhart, Volume 2. Cheltenham: Edward Elgar.

Castren, Olli and Marcus Miller (2003) “Growth Expectations, Capital Flows and International Risk Sharing” ECB Working Paper