Bac, M.2016-02-082016-02-0819990965-7576http://hdl.handle.net/11693/25244This paper presents a theoretical analysis of grace periods in the context of an overhang of external debt creating a tax on domestic investment. The grace period arises as a Nash equilibrium strategy of the creditor in a dynamic, noncooperative game. Its length is shown to depend on the planning horizon of the parties, the discount factor and the growth prospect of the debtor country.EnglishDebtMethodologyModelArticle10.1111/1467-9396.001661467-9396