Year: 2021
Type: article
Abstract: Concerns about new debt restructuring episodes are on the rise as the measures necessary to combat the COVID-19 inflict harsh fiscal pressure.The decision to restructure debt is a particularly difficult one that countries should only seek as a last resort.An important question is how can a country avoid 'deceptive reputational risk' whilst attempting to reduce the cost of debt?To address this question, this study investigates the effect of 'deceptive reputational risk' on the outcome of debt restructuring, that is, the unintentional consequence of an increase in debt levels and the decline in gross domestic product (GDP), up to 10 years affect debt restructuring.The indicators GDP and debt-to-GDP are used to proxy 'deceptive reputational risk'.The paper utilizes Fixed Effects Panel approach to study data for Greece, Italy, Cyprus and Ireland for the period of 2000-2020.The study finds that investments, interest rate on debt and stable exchange rates can aid in minimizing 'deceptive reputational risk'.The findings are important addition to the literature on debt restructuring.To the best of the author's knowledge, this study is the first to consider reducing 'deceptive reputation risk' in fiscal policy through the use of macroeconomic variables -real effective exchange rate, interest rate on debt and investments.
Source: JOURNAL OF INTERNATIONAL STUDIES
Author: Ankie Scott-Joseph
Institution: University of the West Indies
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W3181304119