Do Countries Default In "Bad Times"?
This paper uses a new dataset to study the relationship between economic output and sovereign default for the period 1820-2004. We find a negative but surprisingly weak relationship between output and default. Throughout history, countries have indeed defaulted during bad times (when output was relatively low), but they have also maintained debt service in the face of severe adverse shocks, and they have defaulted when domestic economic conditions were favorable. We show that this constitutes a puzzle for standard theories, which predict a much tighter negative relationship as default provides partial insurance against declines in output.
|Date of creation:||May 2007|
|Contact details of provider:|| Postal: Crawford Building, Lennox Crossing, Building #132, Canberra ACT 2601|
Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Web page: http://cama.crawford.anu.edu.au
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Arellano, Cristina, 2008.
"Default risk and income fluctuations in emerging economies,"
7867, University Library of Munich, Germany.
- Cristina Arellano, 2008. "Default Risk and Income Fluctuations in Emerging Economies," American Economic Review, American Economic Association, vol. 98(3), pages 690-712, June.
- Ugo Panizza & Eduardo Levy Yeyati, 2006.
"The Elusive Costs of Sovereign Defaults,"
IDB Publications (Working Papers)
6713, Inter-American Development Bank.
- Cooley, T.F. & Ohanian, L.E., 1989.
"The Cyclical Behavior Of Prices,"
RCER Working Papers
188, University of Rochester - Center for Economic Research (RCER).
- Rankin, Keith, 1992. "New Zealand's Gross National Product: 1859-1939," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 38(1), pages 49-69, March.
- Uhlig, H.F.H.V.S. & Ravn, M., 1997.
"On Adjusting the H-P Filter for the Frequency of Observations,"
1997-50, Tilburg University, Center for Economic Research.
- Ravn, Morten O & Uhlig, Harald, 2001. "On Adjusting the HP-Filter for the Frequency of Observations," CEPR Discussion Papers 2858, C.E.P.R. Discussion Papers.
- Morten O. Ravn & Harald Uhlig, 2001. "On Adjusting the HP-Filter for the Frequency of Observations," CESifo Working Paper Series 479, CESifo Group Munich.
- David K. Backus & Patrick J. Kehoe, 1991.
"International evidence on the historical properties of business cycles,"
145, Federal Reserve Bank of Minneapolis.
- Backus, David K & Kehoe, Patrick J, 1992. "International Evidence of the Historical Properties of Business Cycles," American Economic Review, American Economic Association, vol. 82(4), pages 864-888, September.
- David K. Backus & Patrick J. Kehoe, 1992. "International Evidence on the Historical Properties of Business Cycles," Working Papers 92-5, New York University, Leonard N. Stern School of Business, Department of Economics.
- Marianne Baxter & Robert G. King, 1999.
"Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series,"
The Review of Economics and Statistics,
MIT Press, vol. 81(4), pages 575-593, November.
- Marianne Baxter & Robert G. King, 1995. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series," NBER Working Papers 5022, National Bureau of Economic Research, Inc.
- Tom Doan, "undated". "BKFILTER: RATS procedure to implement band pass filter using Baxter-King method," Statistical Software Components RTS00026, Boston College Department of Economics.
- Agustín Maravall & Ana del Río, 2001. "Time Aggregation and the Hodrick-Prescott Filter," Working Papers 0108, Banco de España;Working Papers Homepage.
- Mark Aguiar & Gita Gopinath, 2004.
"Defaultable Debt, Interest Rates and the Current Account,"
NBER Working Papers
10731, National Bureau of Economic Research, Inc.
- Mark Aguiar & Gita Gopinath, 2004. "Defaultable debt, interest rates and the current account," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
- 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.
- Mark Aguiar & Gita Gopinath, 2004. "Defaultable debt, interest rates, and the current account," Working Papers 04-5, Federal Reserve Bank of Boston.
- Jonathan Eaton & Mark Gersovitz, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Oxford University Press, vol. 48(2), pages 289-309.
- Don Harding & Adrian Pagan, 1999. "Dissecting the Cycle," Melbourne Institute Working Paper Series wp1999n13, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- Schulze, Max-Stephan, 2000. "Patterns of growth and stagnation in the late nineteenth century Habsburg economy," European Review of Economic History, Cambridge University Press, vol. 4(03), pages 311-340, December.
- Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
- Yue, Vivian Z., 2010.
"Sovereign default and debt renegotiation,"
Journal of International Economics,
Elsevier, vol. 80(2), pages 176-187, March.
- repec:wbk:wbpubs:12425 is not listed on IDEAS
- Yousef, Tarik M, 2002. "Egypt's Growth Performance under Economic Liberalism: A Reassessment with New GDP Estimates, 1886-1945," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(4), pages 561-579, December.
- Greasley, David & Oxley, Les, 2000. "Measuring New Zealand's GDP 1865-1933: A Cointegration-Based Approach," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(3), pages 351-368, September.
- World Bank, 2006. "World Development Indicators 2006," World Bank Publications, The World Bank, number 8151.
- Don Harding & Adrian Pagan, 2000.
"Disecting the Cycle: A Methodological Investigation,"
Econometric Society World Congress 2000 Contributed Papers
1164, Econometric Society.
- Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March.
- World Bank, 2005. "World Development Indicators 2005," World Bank Publications, The World Bank, number 12426.
- Max-Stephan Schulze, 2000. "Patterns of growth and stagnation in the late nineteenth century Habsburg economy," LSE Research Online Documents on Economics 4370, London School of Economics and Political Science, LSE Library.
When requesting a correction, please mention this item's handle: RePEc:een:camaaa:2007-23. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cama Admin)
If references are entirely missing, you can add them using this form.