The Heterogeneity of Default Costs: Evidence from Recent Sovereign Debt Crises

The Heterogeneity of Default Costs: Evidence from Recent Sovereign Debt Crises

This paper examines the costs of recent sovereign defaults using synthetic control methods, a novel econometric technique based on comparative case studies. Evidence on the effects of debt crises is thus presented on a case-by-case basis, uncovering large variations in country-specific experiences...

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Bibliographic Details
Published in:MAGKS - Joint Discussion Paper Series in Economics (Band 51-2011)
Main Author: Jorra, Markus
Format: Work
Language:English
Published: Philipps-Universität Marburg 2011
Subjects:
Synthetic control methods
Wirtschaft
Sovereign defaults
Case study
Default costs
Economics
Online Access:PDF Full Text
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Description
Summary:This paper examines the costs of recent sovereign defaults using synthetic control methods, a novel econometric technique based on comparative case studies. Evidence on the effects of debt crises is thus presented on a case-by-case basis, uncovering large variations in country-specific experiences. Our estimates of cumulated output losses, e.g., range between 8.5% and 23% depending on the considered default episode. Further differences concern the persistence and likely causes of these costs. In particular, our results are consistent with the selective use of direct trade sanctions as punishment for sovereign defaults.
Physical Description:42 Pages
ISSN:1867-3678
DOI:10.17192/es2024.0115

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