International borrowing and exhaustible resources : Note on a liquidity creditworthiness conflict
Journal
European Economic Review
Type
journal article
Date Issued
1988-07-01
Author(s)
Mohr, Ernst
Abstract
A sovereign debtor facing a credit limit due to unenforceable debt contracts may have an incentives to increase its creditworthiness by making itself subject to more severe sanctions in response to a debt repudiation. It is shown that for a natural resources exporting country this incentive may result in a more resource conserving extraction policy at the expense of current income. A resource exporting LDC thus may face a conflict between creditworthiness and liquidity which would not have to be faced were the source of income not exhaustable. If risk and the possibility of a cooperative settlement of a debtor-creditor confrontation is introduced, then this debt management conflict is even aggravated. Then an increase in current production also implies an increase in the risk-premium charged on sovereign debt.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Elsevier
Volume
32
Number
6
Start page
1385
End page
1392
Pages
8
Subject(s)
Division(s)
Eprints ID
40192