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Mr. Tamon Asonuma, Mr. Marcos d Chamon, and Akira Sasahara

GDP, respectively; β 0 m (and β 0 x ) is a constant term; DR c,t is a vector of debt restructuring dummies including the post-default restructuring dummy, the weakly preemptive debt restructuring dummy and the strictly preemptive restructuring dummy; β 1 m (and β 1 x ) is a vector of coefficients of debt restructuring dummies to be estimated; X c,t is a set of control variables; β 2 m (and β 2 x )) is a vector of coefficients on control variables to be estimated; and ϵ c , t m (and ϵ c , t x ) is the error term. Since our specification follows the

Mr. Jongsoon Shin

aggregate corporate debt-to-equity on real GDP growth, and the effects of systemic debt reduction periods, framed as a corporate restructuring dummy, on real GDP growth. The paper also estimates the impacts of mergers and acquisitions (M&A) on growth. II. Approach to Corporate Restructuring Corporate restructuring is a set of discrete decisive measures to increase a firm’s competitiveness and enhance its value, and can take place at various levels . Corporate restructuring also entails an improvement in operational or financing structure, to transform a firm into

Mr. Jongsoon Shin
This paper describes issues in Korea’s corporate sector, the need for restructuring, and the authorities’ initiatives and challenges. It then identifies lessons from other countries’ experience and conducts an econometric analysis based on cross-country aggregate data, compared with previous studies which mostly use firm-level data. This analysis finds that restructuring episodes, while sometimes challenging in the short term, have typically been associated with more rapid economic growth afterward. Corporate restructuring could have a negative effect on the labor and the financial markets in the short term, but is associated with positive growth through increased investment and capital productivity in the medium term, outpacing the negative effects.
Mr. Jongsoon Shin
Lorenzo Forni, Mr. Geremia Palomba, Ms. Joana Pereira, and Christine J. Richmond

causality. Therefore, we estimate an instrumented version of model (2). Specifically, we instrument the restructuring dummy HC i,t as a way to confirm that restructuring is indeed exogenous to growth (see Section IV.B ). As instrument, we use the probability that a restructuring occurs in any given year post default. We proxy this probability using the distribution over time of restructurings after default in the whole sample of episodes that we have. To further test the robustness of our results, we run difference-in-difference regressions (see Section IV.C ). The

Lorenzo Forni, Mr. Geremia Palomba, Ms. Joana Pereira, and Christine J. Richmond
This paper studies the effect of sovereign debt restructurings with external private creditors on growth during the period 1970-2010. We find that there are bad and good (or not so bad) debt restructurings for growth. While growth generally declines in the aftermath of a sovereign debt restructuring, agreements that allow countries to exit a default spell (final restructurings) are associated with improving growth. The impact can be significant. In general, three years after restructuring, growth is about 5 percent lower compared to countries that did not face restructuring over the same period. The exception is for final restructurings, which result in positive growth in the years immediately after the restructuring. Final restructurings tend to be better for growth because they reduce countries’ debt, with the strongest effect for countries that exit restructurings with relatively low debt levels.
Mr. Tamon Asonuma, Dirk Niepelt, and Mr. Romain Ranciere
Rejecting a common assumption in the sovereign debt literature, we document that creditor losses (“haircuts”) during sovereign restructuring episodes are asymmetric across debt instruments. We code a comprehensive dataset on instrument-specific haircuts for 28 debt restructurings with private creditors in 1999–2015 and find that haircuts on shorter-term debt are larger than those on debt of longer maturity. In a standard asset pricing model, we show that increasing short-run default risk in the run-up to a restructuring episode can explain the stylized fact. The data confirms the predicted relation between perceived default risk, bond prices, and haircuts by maturity.
Mr. Tamon Asonuma, Mr. Marcos d Chamon, and Akira Sasahara
Sovereign debt restructurings have been shown to influence the dynamics of imports and exports. This paper shows that the impact can vary substantially depending on whether the restructuring takes place preemptively without missing payments to creditors, or whether it takes place after a default has occurred. We document that countries with post-default restructurings experience on average: (i) a more severe and protracted decline in imports, (ii) a larger fall in exports, and (iii) a sharper and more prolonged decline in both GDP, investment and real exchange rate than preemptive cases. These stylized facts are confirmed by panel regressions and local projection estimates, and a range of robustness checks including for the endogeneity of the restructuring strategy. Our findings suggest that a country’s choice of how to go about restructuring its debt can have major implications for the costs it incurs from restructuring.
Mr. Tamon Asonuma, Dirk Niepelt, and Mr. Romain Ranciere

.08) Maturity Differential −0 49*** −0.49*** −0.49*** (S - L, year) (0.05) (0.05) (0.05) Duration of Restructuring −10.39 (years) (7.92) Argentina 2001–2005 43.67** Restructuring (dummy) (22.12) Strictly Preemptive Restructuring 17.89** (dummy) (7.22) Weakly Preemptive Restructuring 9.79 (dummy) (11.71) External Debt Restructuring 16.56** (dummy) (7.07) Constant 2.88 2.21*** −16.39* (3.08) (0.60) (8.66) Episode

Mr. Xavier Debrun

.068 2.434 0.016 Nonoil commodities prices 0.067 2.171 0.031 Default-restructuring dummy 0.477 2.683 0.008 Weighted R -squared 0.662 Unweighted R -squared 0.504 Number of observations 244 Note: Feasible generalized least square estimates with robust standard errors. Country fixed effects not reported. The country fixed effects provide additional information on surplus-generating capacity. Although they capture any country-specific feature systematically affecting fiscal performance, they