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The Costs of Default and International Lending

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During the past few years, a number of less developed countries (LDCs) have had difficulty repaying their foreign debt. Sometimes payments have been suspended or delayedmaking it necessary for debtors and creditors to renegotiate or reschedule loan payments. These problems have raised questions about the costs and benefits of different types of debt repayment negotiations and their implications for the future of internationallending. This article investigates these questions.

During the past few years, a number of less developed countries (LDCs) have had difficulty repaying their foreign debt. Sometimes payments have been suspended or delayedmaking it necessary for debtors and creditors to renegotiate or reschedule loan payments. These problems have raised questions about the costs and benefits of different types of debt repayment negotiations and their implications for the future of internationallending. This article investigates these questions.


Suggested citation: Wang, Chien Nan, 1989. "The Costs of Default and International Lending," Federal Reserve Bank of Cleveland, Economic Commentary, 03.01.1989.

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