Abstract:
Debt rescheduling is the event that occurs when a less developed country is no longer able to meet its debt payments to its creditors. When a country cannot make its payments, it must renegotiate its loan agreements or obtain monetary aid from outside sources. Because rescheduling can involve large amounts of money, it is very important for those institutions that lend to less developed countries to be able predict the event and hence be better able to manage their own cash flows and use their money more efficiently.This paper will examine two aspects of debt rescheduling; research already completed and some of the measures used in that research. It will look at a few of the studies done on Third World debt rescheduling, noting the procedures used, the variables included, and the results and conclusions. It will also look at alternate ways to predict debt rescheduling and compare these methods to the ones in earlier studies. The second section will look at the factors affecting some of the measures used in studying Third World debt and evaluating the risk of a country. The paper will conclude with a summary of the topics discussed and this author's conclusions. A summary of the studies and their findings can be found in exhibit 1.
