Life after default: Private vs. official sovereign debt restructurings

Silvia Marchesi and Tania Masi

No 370, Working Papers from University of Milano-Bicocca, Department of Economics

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 fi nd that private and official restructurings are associated to different growth outcomes. 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. We present further evidence for the heterogeneity of the economic impact of debt restructurings by controlling for the severity of the default and distinguishing between debt flow and stock reduction. Using panel data analysis to analyze 548 restructuring episodes, we confi rm that official and private defaults may have different effects on GDP growth and should then be treated differently.

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)
Pages: 85
Date: 2017-09, Revised 2019-02
New Economics Papers: this item is included in nep-cba and nep-gro
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Life After Default: Private vs. Official Sovereign Debt Restructurings (2018)
Working Paper: Life after default? Private vs. official sovereign debt restructurings (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:370

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