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Averting defaults in turbulent times: controversies over the League of Nations preferred creditor status

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Publication Geneva: Paul Bairoch Institute of Economic History, 2017
Collection Working Papers of the Paul Bairoch Institute of Economic History; 5/2017
Description 27
Abstract Loans by the IMF are considered to have “preferred creditor status”. However, given the potential distortions for the allocation of resources in IMF lending, the current debt crisis in Greece has raised new questions about the need for such treatment. This paper brings a historical dimension to the debate and analyzes the link between a multilateral’s preferred creditor status and its capacity to support countries in financial distress. During the early 1930s, the League of Nations attempted to secure a preferred status for the loans it promoted. At the onset of the Great Depression, while these loans were not legally senior, governments granted the League loans a de facto preferred status under the assumption that averting default would foster renewed support from the League. However, when support did not materialize, the loans’ exceptional treatment vanished, further weakening the position of the League to secure emergency lending.
Keywords sovereign defaultspreferred creditor statusIMFsovereign debt markets
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FLORES ZENDEJAS, Juan. Averting defaults in turbulent times: controversies over the League of Nations preferred creditor status. 2017 https://archive-ouverte.unige.ch/unige:98451

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Deposited on : 2017-11-02

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