Analysing UDROP: An instrument for stabilizing the international financial architecture

This paper analyses implications of a proposal, called UDROP, to reform the standards of international debt contracts. The idea is to give borrowers a roll-over option at maturity for a specified length of time. Using recently developed models of financial crises, the paper shows for which type of crisis UDROP is beneficial. Moral hazard of the borrower is one of the problems UDROP faces which can be addressed by appropriately designing the debt contract.

31. December 2001

Authors Axel Lindner

Whom to contact

For Researchers

For Journalists

Mitglied der Leibniz-Gemeinschaft LogoTotal-Equality-LogoWeltoffen Logo