Output costs of sovereign crises: some empirical estimates

Bianca De Paoli (), Glenn Hoggarth and Victoria Saporta

No 362, Bank of England working papers from Bank of England

Abstract: Avoiding the broader output losses to their economy is likely to be the key reason why governments avoid debt crises. Despite this, there has been little work that seeks to quantify output losses associated with such crises. This paper seeks to fill this gap. We find that debt crisis episodes last for long - on average by about ten years - and are associated with large output losses (of at least 5% per year). Sovereign crises rarely occur in isolation - more often than not they are associated with currency crises or banking crises or both. It is the occurrence of a potent cocktail of 'twin' or 'triple' crises that is strongly associated with output losses rather than sovereign crisis per se.

Keywords: Sovereign debt; output losses; banking crises; currency crises (search for similar items in EconPapers)
JEL-codes: F33 F34 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2009-02-16
New Economics Papers: this item is included in nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (56)

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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0362

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