Do Countries Default in Bad Times? The Role of Alternative Detrending Techniques

Ugo Panizza

No 17216, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Quantitative models of sovereign debt predict that countries should default during deep recessions. However, empirical research on sovereign debt has found a surprisingly large share of \good times" defaults (i.e., defaults that happen when GDP is above trend). Existing evidence also indicates that, on average, defaults happen when output is close to potential. This paper reassesses the empirical evidence and shows that the detrending technique proposed by Hamilton (2018) yields results that are closer to the predictions of standard quantitative models of sovereign debt.

Keywords: Sovereign debt; Default business cycles (search for similar items in EconPapers)
JEL-codes: F32 F34 H63 (search for similar items in EconPapers)
Date: 2022-04
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP17216 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Do Countries Default in Bad Times? The Role of Alternative Detrending Techniques (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:17216

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP17216

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().