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

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

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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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
Note: IFM ME
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  6. Schularick, Moritz & Taylor, Alan M., 2009. "Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870-2008," CEPR Discussion Papers 7570, C.E.P.R. Discussion Papers.
  7. Bulow, J. & Rogoff, K., 1988. "Sovereign Debt: Is To Forgive To Forget?," Working papers 8813, Wisconsin Madison - Social Systems.
  8. anonymous, 1982. "Monetary policy report to Congress," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Mar, pages 125-134.
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  12. Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "Banking Crises: An Equal Opportunity Menace," NBER Working Papers 14587, National Bureau of Economic Research, Inc.
  13. Harold L. Cole & Patrick J. Kehoe, 1996. "Reputation Spillover Across Relationships with Enduring and Transient Beliefs: Reviving reputation Models of Debt," NBER Working Papers 5486, National Bureau of Economic Research, Inc.
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  17. Catão, Luis A.V. & Fostel, Ana & Kapur, Sandeep, 2009. "Persistent gaps and default traps," Journal of Development Economics, Elsevier, vol. 89(2), pages 271-284, July.
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  22. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
  23. 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.
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