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Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten

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Listed author(s):
  • Reinhart, Carmen M.
  • Rogoff, Kenneth

Abstract

Even after one of the most severe multi-year crises on record in the advanced economies, the received wisdom in policy circles clings to the notion that high-income countries are completely different from their emerging market counterparts. The current phase of the official policy approach is predicated on the assumption that debt sustainability can be achieved through a mix of austerity, forbearance and growth. The claim is that advanced countries do not need to resort to the standard toolkit of emerging markets, including debt restructurings and conversions, higher inflation, capital controls and other forms of financial repression. As we document, this claim is at odds with the historical track record of most advanced economies, where debt restructuring or conversions, financial repression, and a tolerance for higher inflation, or a combination of these were an integral part of the resolution of significant past debt overhangs.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9750.

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Date of creation: Nov 2013
Handle: RePEc:cpr:ceprdp:9750
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Find related papers by JEL classification:
  • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
  • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
  • F3 - International Economics - - International Finance
  • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
  • G1 - Financial Economics - - General Financial Markets
  • H6 - Public Economics - - National Budget, Deficit, and Debt
  • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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  1. Jeffrey Frankel & Jesse Schreger, 2013. "Over-optimistic official forecasts and fiscal rules in the eurozone," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(2), pages 247-272, June.
  2. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
  3. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
  4. Luc Laeven & Fabian Valencia, 2010. "Resolution of Banking Crises; The Good, the Bad, and the Ugly," IMF Working Papers 10/146, International Monetary Fund.
  5. Carmen M. Reinhart & Vincent R. Reinhart & Kenneth S. Rogoff, 2012. "Public Debt Overhangs: Advanced-Economy Episodes since 1800," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 69-86, Summer.
  6. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
  7. Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "From Financial Crash to Debt Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 1676-1706, August.
  8. Reinhart, Carmen M. & Trebesch, Christoph, 2014. "A Distant Mirror of Debt, Default, and Relief," CEPR Discussion Papers 10195, C.E.P.R. Discussion Papers.
  9. Reinhart, Carmen M. & Rogoff, Kenneth S., 2013. "Banking crises: An equal opportunity menace," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4557-4573.
  10. Carmen M. Reinhart & M. Belen Sbrancia1, 2015. "The liquidation of government debt," Economic Policy, CEPR;CES;MSH, vol. 30(82), pages 291-333.
  11. Carmen M. Reinhart & Christoph Trebesch, 2016. "Sovereign Debt Relief And Its Aftermath," Journal of the European Economic Association, European Economic Association, vol. 14(1), pages 215-251, 02.
  12. Michael Reddell, 2012. "The New Zealand Debt Conversion Act 1933: a case study in coercive domestic public debt restructuring," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 75, pages 38-45, March.
  13. Reinhart, Karmen & Rogoff, Kenneth, 2009. ""This time is different": panorama of eight centuries of financial crises," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 77-114, March.
  14. Markus K. Brunnermeier & Yuliy Sannikov, 2012. "Redistributive monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 331-384.
  15. Smits, J.-P. & Woltjer, P. & Ma, D., 2009. "A Dataset on Comparative Historical National Accounts, ca.1870-1950: A Time-Series Perspective," GGDC Research Memorandum GD-107, Groningen Growth and Development Centre, University of Groningen.
  16. Diaz-Alejandro, Carlos, 1985. "Good-bye financial repression, hello financial crash," Journal of Development Economics, Elsevier, vol. 19(1-2), pages 1-24.
  17. Robert J. Barro & José F. Ursúa, 2009. "Stock-Market Crashes and Depressions," NBER Working Papers 14760, National Bureau of Economic Research, Inc.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Le rôle des banques centrales lors du cycle financier selon Claudio Borio
    by ? in D'un champ l'autre on 2014-02-17 16:58:00
  2. Alimenter l’inflation pour réduire la dette publique ?
    by ? in D'un champ l'autre on 2014-06-14 17:29:00
  3. L’Europe peut-elle compter sur de larges excédents primaires pour résoudre ses problèmes d’endettement ?
    by ? in D'un champ l'autre on 2014-07-22 23:58:00
  4. Des défauts souverains en miroir
    by ? in D'un champ l'autre on 2014-10-19 23:53:00
  5. Quel rôle joue la répression financière dans la liquidation des dettes publiques ?
    by ? in D'un champ l'autre on 2015-01-26 10:57:00
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