The name is absent



More speci^cally, the creditor (the bank) wants to solve two distinct problems
at the same time: the ...rst one is the “moral hazard” problem, which directly
derives from the “debt overhang”, that is the lack of incentives to invest for the
“good type” in the absence of any debt relief. The second problem is the need for
the bank to separate between the two types in order not to grant the relief to the
“bad” one (that is the one which will never invest).

Notice that, in the theoretical model, our de.nition of debt relief involved
more a debt reduction rather than a debt rescheduling. We believe that a debt
rescheduling can be considered as a component of a debt relief initiative (in par-
ticular when it is made at concessional terms, as it is the case for low-income
countries). However, di∏erently to the aforementioned empirical papers, where it
was seen generally as an indicator of a country’s debt servicing d^culties, here
debt rescheduling is considered mainly as a debt relief which creditors may either
decide to grant or not.

In order to .nd the “qualitative factors” which can in≠uence the probability
ofa debt rescheduling, for simplicity, we will focus here only on the .rst problem,
that is on the “moral hazard” aspect.11 Thus, the main idea is to.nd the factors
which a∏ect the amount of debt relief creditors need to grant in order to make
the good type invest and repay. The “moral hazard” condition, which makes the
good type country willing to invest (and repay), is that the bene.ts from the
investment are greater than its costs. After some rearrangements that becomes:

R . D i V (m i 1)=(1 i qκ) i ®(Q(2) + bS):                (3.1)

In equation (3.1) R represents the amount of the debt relief and D stands for
the total amount of external debt and it is positively correlated with
R. V (m i
1)=(1 i qH) corresponds to the outcome of the investment, (m i 1)V; divided by
11If we solved the model taking into account both the “participation” and “the self selection”
constraint we would .nd that basically the same factors will a°ect the probability of a debt
reschedu li n g. For more details on t his, see the quoted paper.

15



More intriguing information

1. Creating a 2000 IES-LFS Database in Stata
2. The name is absent
3. CREDIT SCORING, LOAN PRICING, AND FARM BUSINESS PERFORMANCE
4. The name is absent
5. Pursuit of Competitive Advantages for Entrepreneurship: Development of Enterprise as a Learning Organization. International and Russian Experience
6. How Low Business Tax Rates Attract Multinational Headquarters: Municipality-Level Evidence from Germany
7. The name is absent
8. Nurses' retention and hospital characteristics in New South Wales, CHERE Discussion Paper No 52
9. The economic doctrines in the wine trade and wine production sectors: the case of Bastiat and the Port wine sector: 1850-1908
10. Ongoing Emergence: A Core Concept in Epigenetic Robotics
11. Private tutoring at transition points in the English education system: its nature, extent and purpose
12. The name is absent
13. Road pricing and (re)location decisions households
14. A Study of Prospective Ophthalmology Residents’ Career Perceptions
15. Orientation discrimination in WS 2
16. The name is absent
17. Enterpreneurship and problems of specialists training in Ukraine
18. TINKERING WITH VALUATION ESTIMATES: IS THERE A FUTURE FOR WILLINGNESS TO ACCEPT MEASURES?
19. Evaluating Consumer Usage of Nutritional Labeling: The Influence of Socio-Economic Characteristics
20. Palvelujen vienti ja kansainvälistyminen