Systemic and Idiosyncratic Sovereign Debt Crises

Graciela Kaminsky () and Pablo Vega-García

No 20042, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The theoretical literature on sovereign defaults has focused on adverse shocks to debtors’ economies, suggesting that defaults are of an idiosyncratic nature. Still, sovereign debt crises are also of a systemic nature, clustered around panics in the financial center such as the European Sovereign Debt Crisis in the aftermath of the U.S. Subprime Crisis in 2008. Crises in the financial centers are rare disasters and thus, their effects on the periphery can only be captured by examining long episodes. This paper examines sovereign defaults from 1820 to the Great Depression, with a focus on Latin America. We find that 63% of the crises are of a systemic nature. These crises are different. Both the international collapse of liquidity and the growth slowdown in the financial centers are at their core. These global shocks trigger longer default spells and larger investors’ losses.

JEL-codes: F3 F34 (search for similar items in EconPapers)
Date: 2014-04
New Economics Papers: this item is included in nep-his, nep-lam and nep-opm
Note: IFM
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Published as Systemic and Idiosyncratic Sovereign Debt Crises , Graciela Laura Kaminsky, Pablo Vega-García. in Sovereign Debt and Financial Crises , Kalemli-Özcan, Reinhart, and Rogoff. 2016
Published as Graciela Laura Kaminsky & Pablo Vega-García, 2016. "SYSTEMIC AND IDIOSYNCRATIC SOVEREIGN DEBT CRISES," Journal of the European Economic Association, vol 14(1), pages 80-114.

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Related works:
Journal Article: SYSTEMIC AND IDIOSYNCRATIC SOVEREIGN DEBT CRISES (2016)
Journal Article: Systemic and Idiosyncratic Sovereign Debt Crises (2016)
Working Paper: Systemic and Idiosyncratic Sovereign Debt Crises (2015)
Chapter: Systemic and Idiosyncratic Sovereign Debt Crises (2013)
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