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On Graduation from Default, Inflation and Banking Crisis: Elusive or Illusion?

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  • Rong Qian
  • Carmen M. Reinhart
  • Kenneth S. Rogoff

Abstract

This paper uses a data set of over two hundred years of sovereign debt, banking and inflation crises to explore the question of how long it takes a country to “graduate” from the typical pattern of serial crisis that most emerging markets experience. We find that for default and inflation crises, twenty years is a significant market, but the distribution of recidivism has extremely fat tails. In the case of banking crises, it is unclear whether countries ever graduate. We also examine the more recent phenomenon of IMF programs, which sometimes result in “near misses” but sometimes end in default even after a program is instituted. The paper raises the important theoretical question of why countries experience serial default, and how they might graduate.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16168.

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Date of creation: Jul 2010
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Publication status: published as On Graduation from Default, Inflation and Banking Crises: Elusive or Illusion? , Rong Qian, Carmen M. Reinhart, Kenneth S. Rogoff. in NBER Macroeconomics Annual 2010, Volume 25 , Acemoglu and Woodford. 2011
Handle: RePEc:nbr:nberwo:16168

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  1. Aguiar, Mark & Gopinath, Gita, 2006. "Defaultable debt, interest rates and the current account," Journal of International Economics, Elsevier, vol. 69(1), pages 64-83, June.
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  4. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "From Financial Crash to Debt Crisis," NBER Working Papers 15795, National Bureau of Economic Research, Inc.
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  8. Reinhart, Carmen & Rogoff, Kenneth, 2009. "Banking Crises: An Equal Opportunity Menace," CEPR Discussion Papers 7131, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Richard J. Herring, 2013. "The Case for Rapid Resolution Plans," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 1-17, May.
  2. Kay Giesecke & Francis A. Longstaff & Stephen Schaefer & Ilya Strebulaev, 2012. "Macroeconomic Effects of Corporate Default Crises: A Long-Term Perspective," NBER Working Papers 17854, National Bureau of Economic Research, Inc.
  3. Amalia Morales-Zumaquero & Simón Sosvilla-Rivero, 2012. "Real exchange rate volatility, financial crises and nominal exchange regimes," Working Papers 12-05, Asociación Española de Economía y Finanzas Internacionales.
  4. Pope, Robin & Selten, Reinhard, 2013. "Currency wars not public debt may create a financial meltdown," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79862, Verein für Socialpolitik / German Economic Association.
  5. Jeffrey A. Frankel & Carlos A. Végh & Guillermo Vuletin, 2011. "On Graduation from Fiscal Procyclicality," NBER Working Papers 17619, National Bureau of Economic Research, Inc.
  6. Christoph A. Schaltegger & Martin Weder, 2013. "Fiscal Adjustments and the Probability of Sovereign Default," CREMA Working Paper Series 2013-06, Center for Research in Economics, Management and the Arts (CREMA).
  7. Mark Aguiar, 2011. "Comment on "On Graduation from Default, Inflation and Banking Crises: Elusive or Illusion?"," NBER Chapters, in: NBER Macroeconomics Annual 2010, Volume 25, pages 37-46 National Bureau of Economic Research, Inc.
  8. Tjeerd M. Boonman & Jan P. A. M. Jacobs & Gerard H. Kuper, 2011. "Why didn't the Global Financial Crisis hit Latin America?," CIRANO Working Papers 2011s-63, CIRANO.
  9. Raffaela Giordano & Marcello Pericoli & Pietro Tommasino, 2013. "Pure or Wake-up-Call Contagion? Another Look at the EMU Sovereign Debt Crisis," International Finance, Wiley Blackwell, vol. 16(2), pages 131-160, 06.
  10. Qian, Rong, 2012. "Why do some countries default more often than others ? the role of institutions," Policy Research Working Paper Series 5993, The World Bank.
  11. Reinhart, Carmen & Qian, Rong & Rogoff, Kenneth, 2010. "Do countries “graduate” from crises? Some historical perspective," MPRA Paper 24761, University Library of Munich, Germany.
  12. Taylor, Alan M, 2010. "Global finance after the crisis," Bank of England Quarterly Bulletin, Bank of England, vol. 50(4), pages 366-377.

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