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Empirical Evidence on Selective Sovereign Defaults

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  • Wojciech Paczos

Abstract

This paper introduces a new empirical measure of fiscal fragility, specifically defined by fluctuations in the government’s tax base, to analyze selective sovereign defaults on domestic and foreign debts. Utilizing data from multiple economies, the study tests theoretical predictions linking output and tax base shocks to selective default probabilities. The results confirm that output contractions predominantly drive foreign defaults, whereas fluctuations in the tax base primarily induce domestic defaults. The findings enhance the understanding of sovereign default risks, emphasizing the distinct roles of domestic and foreign debts.

Suggested Citation

  • Wojciech Paczos, 2026. "Empirical Evidence on Selective Sovereign Defaults," Ekonomista, Polskie Towarzystwo Ekonomiczne, issue 2, pages 129-140.
    • Handle: RePEc:aoq:ekonom:y:2026:i:2:p:129-140
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    Keywords

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    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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