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Sovereign default and public debt: What role for fiscal rules?

Author

Listed:
  • Ablam Estel Apeti
  • Samuel Obeng
  • Abrams M.E. Tagem
  • Maureen Were

Abstract

Public debt has increased steadily over the years, leaving many countries at risk of debt distress and even pushing some to default. This paper analyses the impact of sovereign default on post-default debt-to-GDP ratios in 144 countries from 1980 to 2019. Applying the entropy balancing method, we provide robust evidence that sovereign defaults are associated with higher debt-to-GDP ratios. Furthermore, we find that the effect of default on debt is robust to alternative scenarios, empirical methods, and dynamic effects.

Suggested Citation

  • Ablam Estel Apeti & Samuel Obeng & Abrams M.E. Tagem & Maureen Were, 2025. "Sovereign default and public debt: What role for fiscal rules?," WIDER Working Paper Series wp-2025-70, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2025-70
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    References listed on IDEAS

    as
    1. Jean‐Louis Combes & Xavier Debrun & Alexandru Minea & René Tapsoba, 2018. "Inflation Targeting, Fiscal Rules and the Policy Mix: Cross‐effects and Interactions," Economic Journal, Royal Economic Society, vol. 128(615), pages 2755-2784, November.
    2. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2023. "Yet it Endures: The Persistence of Original Sin," Open Economies Review, Springer, vol. 34(1), pages 1-42, February.
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