Self-Fulfilling Debt Crises with Long Stagnations

Joao Ayres, Gaston Navarro, Juan Pablo Nicolini and Pedro Teles

No 659, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: We assess the quantitative relevance of expectations-driven sovereign debt crises, focusing on the southern European crisis of the early 2010s and the Argentine default of 2001. The source of multiplicity is the one in Calvo (1988). Crucial for multiplicity is an output process characterized by long periods of either high growth or stagnation, which we estimate using data for these countries. We find that expectations-driven debt crises are quantitatively relevant but state dependent, as they occur only during periods of stagnation. Expectations, and how they respond to policy, are the major factors explaining default rates and credit spread differences between Spain and Argentina.

Keywords: Stagnations; Self-fulfilling debt crises; Multiplicity; Sovereign default (search for similar items in EconPapers)
JEL-codes: E44 F34 (search for similar items in EconPapers)
Date: 2024-06-18
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.minneapolisfed.org/research/sr/sr659.pdf (application/pdf)

Related works:
Working Paper: Self-Fulfilling Debt Crises with Long Stagnations (2023)
Working Paper: Self-Fulfilling Debt Crises with Long Stagnations (2023)
Working Paper: Self-Fulfilling Debt Crises with Long Stagnations (2019)
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:fip:fedmsr:98597

DOI: 10.21034/sr.659

Access Statistics for this paper

More papers in Staff Report from Federal Reserve Bank of Minneapolis Contact information at EDIRC.
Bibliographic data for series maintained by Kate Hansel ().