The Costs of Sovereign Default

October 1, 2008

Preview Citation

Format: Chicago

Eduardo Borensztein, and Ugo Panizza. The Costs of Sovereign Default, (USA: International Monetary Fund, 2008) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper evaluates empirically four types of cost that may result from an international sovereign default: reputational costs, international trade exclusion costs, costs to the domestic economy through the financial system, and political costs to the authorities. It finds that the economic costs are generally significant but short-lived, and sometimes do not operate through conventional channels. The political consequences of a debt crisis, by contrast, seem to be particularly dire for incumbent governments and finance ministers, broadly in line with what happens in currency crises.

Subject: Bank credit, Banking crises, Credit ratings, Debt default, Trade credits

Keywords: Default dummy, Default episode, Default history, WP

Publication Details

Pages:

50
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/238
Stock No:

WPIEA2008238
ISBN:

9781451870961
ISSN:

1018-5941

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