Abstract
The International Monetary Fund and the US Treasury have suggested that countries insert Collective Action Clauses (CACs) into their bonds in order to reduce the severity and frequency of financial crises in emerging markets. Research on the topic of CACs being scarce, this paper is the first to examine the statistical relationship between CACs and overall macroeconomic performance. Econometric evidence of a relationship between CACs and income growth is not found in a sample of emerging markets borrowers in the 1990's. This throws into doubt the claim made by both the IMF and the US Treasury that CACs benefit economic growth in the countries that adopt them.
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