The Costs of Sovereign Default: Evidence from Argentina
Benjamin Hébert and
American Economic Review, 2017, vol. 107, issue 10, 3119-45
We estimate the causal effect of sovereign default on the equity returns of Argentine firms. We identify this effect by exploiting changes in the probability of Argentine sovereign default induced by legal rulings in the case of NML Capital, Ltd. v. Republic of Argentina. We find that a 10 percent increase in the probability of default causes a 6 percent decline in the value of Argentine equities and a 1 percent depreciation of a measure of the exchange rate. We examine the channels through which a sovereign default may affect the economy.
JEL-codes: D22 F31 F34 G32 O14 O16 O19 (search for similar items in EconPapers)
Note: DOI: 10.1257/aer.20151667
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