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How costly are debt crises?

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  • Furceri, Davide
  • Zdzienicka, Aleksandra

Abstract

The aim of this paper is to assess the short and medium-term impact of debt crises on GDP. Using an unbalanced panel of 154 countries from 1970 to 2008, the paper shows that debt crises produce significant and long-lasting output losses, reducing output by about 10 percent after 8 years. The results also suggest that debt crises tend to be more detrimental than banking and currency crises. The significance of the results is robust to different specifications, identification and endogeneity checks, and datasets.

Suggested Citation

  • Furceri, Davide & Zdzienicka, Aleksandra, 2012. "How costly are debt crises?," Journal of International Money and Finance, Elsevier, vol. 31(4), pages 726-742.
  • Handle: RePEc:eee:jimfin:v:31:y:2012:i:4:p:726-742
    DOI: 10.1016/j.jimonfin.2012.01.012
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    More about this item

    Keywords

    Output losses; Debt crises; Sovereign defaults;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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