The aftermath of sovereign debt crises: a narrative approach

Rui Esteves, Seán Kenny and Jason Lennard

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper investigates the causal effects of sovereign debt crises in a sample of 50 defaulting economies between 1870 and 2010. As default is potentially endogenous, we use the narrative approach to identify plausibly exogenous episodes. We find economically and statistically significant costs of up to 3.2 percent of GDP before recovering to the pre-crisis level after five years. The average aftermath, however, conceals a large heterogeneity by default cause. Defaults originating from negative supply shocks, political crises, or adverse terms of trade are associated with higher costs. Demand shocks, in contrast, have a moderate effect that is quickly reversed.

Keywords: business cycles; narrative approach; sovereign debt crises (search for similar items in EconPapers)
JEL-codes: E32 F34 F41 H63 N10 N20 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2024
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Published in Journal of Economic History, 2024. ISSN: 0022-0507

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http://eprints.lse.ac.uk/126096/ Open access version. (application/pdf)

Related works:
Working Paper: The Aftermath of Sovereign Debt Crises: A Narrative Approach (2021)
Working Paper: The aftermath of sovereign debt crises: a narrative approach (2021)
Working Paper: The Aftermath of Sovereign Debt Crises: A Narrative Approach (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:126096

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