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The Costs of Sovereign Default

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  • Eduardo Borensztein
  • Ugo Panizza

Abstract

This paper empirically evaluates four types of costs that may result from an international sovereign default: reputational costs, international trade exclusion costs, costs to the domestic economy through the financial system, and political costs to the authorities. It finds that the economic costs are generally significant but short-lived, and sometimes do not operate through conventional channels. The political consequences of a debt crisis, by contrast, seem to be particularly dire for incumbent governments and finance ministers, broadly in line with what happens in currency crises.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal IMF Staff Papers.

Volume (Year): 56 (2009)
Issue (Month): 4 (November)
Pages: 683-741

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Handle: RePEc:pal:imfstp:v:56:y:2009:i:4:p:683-741

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Quels sont les coûts d’un défaut souverain ?
    by ? in D'un champ l'autre on 2014-08-02 13:35:00
  2. Cost of default on sovereign debt
    by Economic Logician in Economic Logic on 2008-12-11 15:28:00
  3. La prevalenza del declino
    by Alberto Bagnai in Goofynomics on 2013-02-16 18:13:00
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  5. Le europee: istruzioni per l'uso (il mio 25 aprile)
    by Alberto Bagnai in Goofynomics on 2014-04-25 13:08:00
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