The Costs of Sovereign Default
Inter-American Development Bank (IADB)
United Nations - Conference on Trade and Development (UNCTAD)
IMF Staff Papers, Vol. 56, No. 4, pp. 683-741, 2009
This paper empirically evaluates four types of costs that may result from an international sovereign default: reputational costs, international trade exclusion costs, costs to the domestic economy through the financial system, and political costs to the authorities. It finds that the economic costs are generally significant but short-lived, and sometimes do not operate through conventional channels. The political consequences of a debt crisis, by contrast, seem to be particularly dire for incumbent governments and finance ministers, broadly in line with what happens in currency crises.
Number of Pages in PDF File: 59Accepted Paper Series
Date posted: October 25, 2010
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