IMF Policy Discussion Papers Volume 2005 Issue 009: Considerations in the Choice of the Appropriate Discount Rate for Evaluating Sovereign Debt Restructurings (2005)

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Considerations in the Choice of the Appropriate Discount Rate for Evaluating Sovereign Debt Restructurings

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Ms. Julie A Kozack

Ms. Julie A Kozack
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Series:: IMF Policy Discussion Papers

Volume/Issue:: Volume 2005: Issue 009

Publication Date:: 01 Dec 2005

DOI:: https://doi.org/10.5089/9781451975840.003

ISBN:: 9781451975840

ISSN:: 1564-5193

Pages:: 29

Keywords:: PDP; NPV calculation; NPV saving; debt-service payment; Discount rate; sovereign debt restructuring; financial crisis; net present value; discount rate range; uniform discount rate; NPV cost; default premium; NPV estimate; stock concept; calculations to the choice; savings from the perspective; associated NPV calculation; NPV neutral; Discount rates; Debt restructuring; Debt service; Debt sustainability; Yield curve; Global

Legal-disclaimer:: This Policy Discussion Paper should not be reported as representing the views of the IMF. The views expressed in this Policy Discussion Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Policy Discussion Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Series:: IMF Policy Discussion Papers

Volume/Issue:: Volume 2005: Issue 009

Language:: English

Publication Date:: 01 Dec 2005

DOI:: https://doi.org/10.5089/9781451975840.003

ISBN:: 9781451975840

ISSN:: 1564-5193

Pages:: 29

Keywords:: PDP; NPV calculation; NPV saving; debt-service payment; Discount rate; sovereign debt restructuring; financial crisis; net present value; discount rate range; uniform discount rate; NPV cost; default premium; NPV estimate; stock concept; calculations to the choice; savings from the perspective; associated NPV calculation; NPV neutral; Discount rates; Debt restructuring; Debt service; Debt sustainability; Yield curve; Global

Legal-disclaimer:: This Policy Discussion Paper should not be reported as representing the views of the IMF. The views expressed in this Policy Discussion Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Policy Discussion Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

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Assessments regarding the effectiveness of sovereign debt restructurings are often summarized by comparisons of the net present value of debt service before and after the restructuring. These calculations are inherently sensitive to the choice of discount rate. This paper explores issues that arise in selecting discount rates when evaluating sovereign debt restructurings. It suggests using a range of discount rates and centering the analysis around the internal rate of return to assess whether the debt restructuring has generated net present value savings or costs to the debtor.

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IMF Policy Discussion Papers

ISSN:: 1564-5193

Publisher:: International Monetary Fund

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