The Sectorial Effects of Sovereign Default

35 Pages Posted: 19 Dec 2008

See all articles by Sergi Lanau

Sergi Lanau

International Monetary Fund (IMF)

Date Written: May 2008

Abstract

This paper explores the linkage between sovereign debt crises and manufacturing industry growth using a difference-in-difference methodology. Industries facing tough import competition perform relatively better after a sovereign default. Export-oriented sectors grow more slowly around default times. These two facts are consistent with the theories stressing trade sanctions as the main cost of sovereign defaults. Industries characterized by high physical capital intensity and asset tangibility tend to suffer less from default episodes. All these effects reach their maximum intensity two to four years after the default event.

Keywords: Sovereign debt, Default, Industry growth

JEL Classification: F34, O47

Suggested Citation

Lanau, Sergi, The Sectorial Effects of Sovereign Default (May 2008). Available at SSRN: https://ssrn.com/abstract=1317446 or http://dx.doi.org/10.2139/ssrn.1317446

Sergi Lanau (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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