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This paper describes the development of debt/equity swaps in the years following the emergence of the international debt crisis. It discusses some of the possible advantages and disadvantages offered by such swaps to three groups of participants--the commercial banks, the investing companies, and the indebted countries. It also provides an analysis of how these swaps are treated in the balance of payments accounts of an indebted country and discusses their possible effects on that country’s money supply, foreign exchange rate and economic growth. The paper concludes that debt/equity swaps can help to make a country’s debt burden more manageable and can contribute to economic growth, but only to a limited extent.

Asset and liability management --- Balance of payments --- Banking --- Banks and Banking --- Banks and banking --- Banks --- Commercial banks --- Debt conversion --- Debt Management --- Debt --- Debts, External --- Depository Institutions --- Exports and Imports --- Finance --- Financial institutions --- Financial Instruments --- Financial Risk Management --- Foreign direct investment --- Industries: Financial Services --- Institutional Investors --- International Investment --- Investment & securities --- Investments, Foreign --- Investments: Stocks --- Loans --- Long-term Capital Movements --- Micro Finance Institutions --- Mortgages --- Non-bank Financial Institutions --- Pension Funds --- Sovereign Debt --- Stocks --- United States

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The exchange rate for the Lebanese pound experienced a protracted period of depreciation from end-1982 to November 1987, followed by a marked appreciation over the following six months. This paper investigates the competing hypotheses that the exchange rate over these two periods was driven by a speculative bubble versus “fundamental” economic variables. Reduced-form and time series models for the exchange rate are estimated and tested for nonstationarity. The results of these test suggest that the pound’s volatility in recent years was consistent with an excessive growth in domestic versus foreign currency denominated liquidity rather than speculation.

Asset and liability management --- Asset bubbles --- Currencies --- Currency --- Domestic liquidity --- Economic & financial crises & disasters --- Economics --- Exchange rates --- Finance --- Finance: General --- Financial Crises --- Financial crises --- Financial Risk Management --- Foreign Exchange --- Foreign exchange --- General Financial Markets: General (includes Measurement and Data) --- Government and the Monetary System --- Government securities --- Investment & securities --- Investment Decisions --- Investments: General --- Liquidity --- Monetary economics --- Monetary Systems --- Money and Monetary Policy --- Money --- Nominal effective exchange rate --- Payment Systems --- Portfolio Choice --- Regimes --- Standards --- Treasury bills and bonds --- Lebanon

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This paper is concerned with debt-equity swaps in which foreign residents are a party to the exchange (i.e., it does not deal with flight capital), and with debt forgiveness. The seemingly unrelated issues of debt-equity swaps and debt forgiveness are jointly treated in this study, because debt forgiveness is in fact a special case of debt-equity swaps. Namely, it is a swap in which a positive amount of debt is exchanged for zero equity. For this reason these two problems have many common features.

Aggregate Factor Income Distribution --- Asset and liability management --- Consumption --- Debt conversion --- Debt Management --- Debt service payments --- Debt service --- Debt --- Debts, External --- Economics --- Exports and Imports --- External debt --- Finance --- Financial institutions --- Financial Instruments --- Financial Risk Management --- Income --- Institutional Investors --- International economics --- International Lending and Debt Problems --- Investment & securities --- Investments: Stocks --- Macroeconomics --- Macroeconomics: Consumption --- National accounts --- Non-bank Financial Institutions --- Pension Funds --- Saving --- Sovereign Debt --- Stocks --- Wealth --- Argentina

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An intertemporal optimizing model of a small open economy is used to analyze how terms of trade changes affect real exchange rates and the trade balance. Temporary current, (expected) future, and permanent changes in the terms of trade are considered. The results suggest that the relationship between the terms of trade and the current account (the so-called Harberger-Laursen-Metzler effect) is sensitive to whether the model incorporates nontradable goods. Thus, the real exchange rate may be an important variable through which terms of trade shocks are transmitted to the current account.

Aggregate Factor Income Distribution --- Asset and liability management --- Balance of payments --- Consumption --- Currency --- Current Account Adjustment --- Debt Management --- Debt relief --- Debt --- Debts, External --- Economic policy --- Economics --- Empirical Studies of Trade --- Exports and Imports --- Finance --- Financial Risk Management --- Foreign Exchange --- Foreign exchange --- Income --- International economics --- International trade --- Macroeconomics --- Macroeconomics: Consumption --- National accounts --- Nternational cooperation --- Public finance & taxation --- Public Finance --- Real exchange rates --- Saving --- Short-term Capital Movements --- Sovereign Debt --- Terms of trade --- Wealth --- China, People's Republic of

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This paper examines two aspects of debt conversions. First, it examines general aspects of secondary markets of developing countries’ bank debt, and the debt conversions that have taken place in a number of developing countries experiencing debt servicing difficulties. Second, by using common characteristics of debt conversion transactions, the paper analyzes the effects of debt conversions on monetary, balance of payments, and fiscal accounts in the debtor countries. It concludes with discussions on implications of debt conversions for reports of external debt statistics.

Asset and liability management --- Banking --- Banks and Banking --- Banks and banking --- Banks --- Computer Programs: Other --- Data Collection and Data Estimation Methodology --- Debt conversion --- Debt Management --- Debt --- Debts, External --- Depository Institutions --- Econometrics & economic statistics --- Economic and financial statistics --- Economic statistics --- Exports and Imports --- External debt --- External sector statistics --- Finance --- Financial institutions --- Financial Instruments --- Financial instruments --- Financial Risk Management --- General Financial Markets: General (includes Measurement and Data) --- Institutional Investors --- International economics --- International Lending and Debt Problems --- Investment & securities --- Investments: General --- Investments: Stocks --- Micro Finance Institutions --- Mortgages --- Non-bank Financial Institutions --- Pension Funds --- Securities --- Sovereign Debt --- Statistics --- Stocks --- United States