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The Costs of Sovereign Default: Evidence from Argentina

Author

Listed:
  • Hebert, Benjamin

    (Stanford University)

  • Schreger, Jesse

    (Harvard University)

Abstract

We estimate the causal effect of sovereign default on the equity returns of Argentine firms. We identify this effect by exploiting changes in the probability of Argentine sovereign default induced by legal rulings in the case of Republic of Argentina v. NML Capital. We find that a 10% increase in the probability of default causes a 6% decline in the value of Argentine equities and a 1% depreciation of a measure of the exchange rate. We examine the channels through which a sovereign default may affect the economy.

Suggested Citation

  • Hebert, Benjamin & Schreger, Jesse, 2016. "The Costs of Sovereign Default: Evidence from Argentina," Research Papers 3456, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3456
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    References listed on IDEAS

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    1. Emi Nakamura & Jón Steinsson, 2018. "High-Frequency Identification of Monetary Non-Neutrality: The Information Effect," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(3), pages 1283-1330.
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    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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