Sovereign default and public debt: What role for fiscal rules?

Ablam Estel Apeti, Samuel Obeng, Abrams M.E. Tagem and Maureen Were

No wp-2025-70, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: Public debt has increased steadily over the years, leaving many countries at risk of debt distress and even pushing some to default. This paper analyses the impact of sovereign default on post-default debt-to-GDP ratios in 144 countries from 1980 to 2019. Applying the entropy balancing method, we provide robust evidence that sovereign defaults are associated with higher debt-to-GDP ratios. Furthermore, we find that the effect of default on debt is robust to alternative scenarios, empirical methods, and dynamic effects.

Keywords: Debt; Entropy balancing weights; Fiscal policy; Sovereign debt (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-opm
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