Sovereigns going bust: estimating the cost of default

Arbeitspapier

This paper estimates the cost of sovereign default by using novel econometric methods – dynamic local projections applied to a sample that is re-randomised using inverse propensity score weights. We find that the impact of default on output is negative, significant and persistent – around 2.8% of GDP on impact and 4.8% at peak. The downturn is driven by sharp falls in investment, accompanied by a collapse in gross trade. The cost rises dramatically if the default is followed by a systemic banking crisis, peaking at 9.5% GDP. Our findings suggest that while autarky costs play an important role, sovereign-banking spillovers are central to the cost of default.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Bonn Econ Discussion Papers ; No. 01/2016

Klassifikation und Themen

• Klassifikation: Wirtschaft ; National Debt; Debt Management; Sovereign Debt ; International Lending and Debt Problems
• Thema: Sovereign default ; sovereign debt ; banking crises ; treatment effects ; local projections ; inverse propensity score weighting

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kuvshinov, Dmitry ; Zimmermann, Kaspar
• Ereignis: Veröffentlichung
• (wer): University of Bonn, Bonn Graduate School of Economics (BGSE)
• (wo): Bonn
• (wann): 2016

Weitere Informationen

• Handle: http://hdl.handle.net/10419/169314
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ