Costs of sovereign debt crises: Restructuring strategies and bank intermediation

Tamon Asonuma, Marcos Chamon, Aitor Erce and Akira Sasahara

Journal of International Economics, 2024, vol. 152, issue C

Abstract: Sovereign debt restructurings are associated with declines in the growth of GDP, investment, bank credit to the private sector and capital flows. Our empirical findings show that the intensity of these losses depends on two aspects: whether the restructuring preempts a default and the extent of the reliance of the country’s private sector on domestic bank credit. Post-default restructurings are associated with worse outcomes than restructurings that take place preemptively without missing payments and going into default. Much of that difference is driven by restructurings in countries with relatively large banking sectors, in particular during post-default episodes.

Keywords: Sovereign debt; Sovereign default; Debt restructuring; GDP growth; Investment; Bank intermediation (search for similar items in EconPapers)
JEL-codes: F34 F41 H63 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:152:y:2024:i:c:s0022199624001296

DOI: 10.1016/j.jinteco.2024.104002

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