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The Costs of Sovereign Default

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Author Info

  • Eduardo Borensztein
  • Ugo Panizza

Abstract

This paper evaluates empirically four types of cost 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

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/238.

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Length: 50
Date of creation: 01 Oct 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/238

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Keywords: Sovereign debt; Public debt; External debt; Financial risk; Bankruptcy;

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References

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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Cost of default on sovereign debt
    by Economic Logician in Economic Logic on 2008-12-11 15:28:00
  2. La prevalenza del declino
    by Alberto Bagnai in Goofynomics on 2013-02-16 18:13:00
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