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The Heterogeneity of Default Costs: Evidence from Recent Sovereign Debt Crises

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  • Markus Jorra

    ()
    (University of Giessen)

Abstract

This paper examines the costs of recent sovereign defaults using synthetic control methods, a novel econometric technique based on comparative case studies. Evidence on the e ects of debt crises is thus presented on a case-by-case basis, uncovering large variations in country-speci c experiences. Our estimates of cumulated output losses, e.g., range between 8.5% and 23% depending on the considered default episode. Further di erences concern the persistence and likely causes of these costs. In particular, our results are consistent with the selective use of direct trade sanctions as punishment for sovereign defaults.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/51-2011_jorra.pdf
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Bibliographic Info

Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201151.

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Length: 41 pages
Date of creation: 2011
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:201151

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Keywords: Sovereign defaults; Default costs; Case study; Synthetic control methods;

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Cited by:
  1. Jana Brandt & Markus Jorra, 2012. "Aid Withdrawal as Punishment for Defaulting Sovereigns? An Empirical Analysis," MAGKS Papers on Economics 201220, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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