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Life after default. Private and official deals

Silvia Marchesi () and Tania Masi ()

Journal of International Money and Finance, 2021, vol. 113, issue C

Abstract: This paper studies the relationship between sovereign debt default and annual GDP growth distinguishing between private and official deals. Using the Synthetic Control Method to analyze 23 official and private defaulters from 1970 to 2017, we find that private defaults generate output losses both during the crisis and persisting over time. Conversely, official defaulters do not show a permanent drop in GDP per capita, neither during the crisis nor in its aftermath. Using panel data analysis to control for the creditors’ loss (haircut), we confirm that official and private defaults may have different effects on GDP growth.

Keywords: Sovereign defaults; Output losses; Synthetic control method (search for similar items in EconPapers)
JEL-codes: F34 G15 H63 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jimonfin.2020.102339

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