The Heterogeneity of Default Costs: Evidence from Recent Sovereign Debt Crises

Markus Jorra

No 201151, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: This paper examines the costs of recent sovereign defaults using synthetic control methods, a novel econometric technique based on comparative case studies. Evidence on the e ects of debt crises is thus presented on a case-by-case basis, uncovering large variations in country-speci c experiences. Our estimates of cumulated output losses, e.g., range between 8.5% and 23% depending on the considered default episode. Further di erences concern the persistence and likely causes of these costs. In particular, our results are consistent with the selective use of direct trade sanctions as punishment for sovereign defaults.

Keywords: Sovereign defaults; Default costs; Case study; Synthetic control methods (search for similar items in EconPapers)
JEL-codes: C21 C23 F34 H63 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2011
New Economics Papers: this item is included in nep-cwa
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201151

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