Game Theory Analysis
From Dickinson College Wiki
Introduction | Cases | Strategy Analysis | Aggregate Model | Conclusion | Sources Used
Eastern Europe: Bulgaria
- $10 billion debt (74% of GDP) => Moratorium on debt payments
- Moratorium on debt payments => Negotiations with the financial institutions (IMF / World Bank)
- Negotiations with the financial institutions => Brady plan (July 28, 1994) + IMF
- Agreeing to the Brady plan conditions =>
- Debt relief -> Guarantees needed for remainder of debt
- Guarantees offered by Worl Bank and IMF -> World Bank and IMF effectively own Bulgaria's debt
- Worl Bank + IMF own debt -> WB and IMF can demand specific economic reforms (dependancy)
- POSITIVE effects of the Brady plan:
- Increased credibility rating
- Increased credibility rating => Expected increase in investment (stabilization)
- Budget is freed from debt repayment burden
- Government can lower obligation to the IMF and World Bank by directly purchasing Brady bonds
- Brady bonds can be used as payment in the privatization process
- NEGATIVE effects of the Brady plan:
- Country becomes dependent on IMF / World Bank (shareholder interests)
- IMF / World Bank can demand actions such as removal of trade barriers, monopolies, or special tax distortions
South America: Argentina
