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Creating a Framework for Sovereign Debt Restructuring that Works

Joseph Stiglitz, Martin Guzman

Paper  2.43mb pdf

Debt matters. In recessions, high uncertainty discourages private spending, weakening demand. Resolving the problem of insufficient demand requires expansionary macroeconomic policies. But “excessive” public debt may constrain the capacity for running expansionary policies." Evidence shows that high public debt also exacerbates the effects of private sector deleveraging after crises, leading to deeper and more prolonged economic depressions (Jordà, Schularick, and Taylor, 2013).

Even if programs of temporary assistance (e.g., from the International Monetary Fund) make full repayment of what is owed possible in those situations, doing so could only make matters worse. If the assistance is accompanied by austerity measures, it would aggravate the economic situation of the debtor. 2,3

Distressed debtors need a fresh start, not just temporary assistance. This is in the best interests of the debtor and the majority of its creditors: precluding a rapid fresh start for the debtor leads to large negative-sum games in which the debtor cannot recover and creditors cannot benefit from the larger capacity of repayment that the recovery would imply.


About the Authors

Joseph Stiglitz
Initiative for Policy Dialogue (IPD)

Joseph E. Stiglitz is President of the Initiative for Policy Dialogue, and Chairman of the Committee on Global Thought at Columbia University. He is University Professor at Columbia, teaching in its Economics Department, its Business School, and its School of International and Public Affairs. He chaired the UN Commission of Experts on Reforms of the International Monetary and Financial System, created in the aftermath of the financial crisis by the President of the General Assembly. He is former Chief Economist and Senior Vice-President of the World Bank and Chairman of President Clinton’s Council of Economic Advisors. He was awarded the Nobel Memorial Prize in Economics in 2001.

Martin Guzman
Initiative for Policy Dialogue (IPD)

Martín Guzmán served as Minister of Economy of the Republic of Argentina (December 2019- July 2022).

He is a Research Scholar at the Columbia University School of Business and Director of the Sovereign Debt Restructuring Program of Columbia’s Initiative for Policy Dialogue. He is the executive director of the academic training program supported by the Institute for New Economic Thinking chaired by Professor Joseph Stiglitz at Columbia University Business School. He is a professor of Money, Credit, and Banking at the National University of La Plata. He has served as editor-in-chief of the Journal of Globalization and Development and is a member of the editorial board.

He is a member of the Pontifical Academy of Social Sciences in the Vatican and a member of the Scientific Board of the Trento Summer School in Adaptive Economic Dynamics at the University of Trento, Italy.

He holds a PhD. In Economics from Brown University, United States (2013). Prior to his doctoral studies, he received a Bachelor’s degree in Economics (2005) and a Master’s degree in Economics (2007) from the National University of La Plata, Argentina.

Publication Information

Type Network Paper
Program Debt Restructuring and Sovereign Bankruptcy
Posted 08/03/16
Download 2.43mb pdf