On Graduation from Default, Inflation and Banking Crisis: Elusive or Illusion?

57 Pages Posted: 12 Jul 2010 Last revised: 1 Apr 2015

See all articles by Rong Qian

Rong Qian

affiliation not provided to SSRN

Carmen M. Reinhart

Peter G. Peterson Institute for International Economics; National Bureau of Economic Research (NBER)

Kenneth Rogoff

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 2010

Abstract

This paper uses a data set of over two hundred years of sovereign debt, banking and inflation crises to explore the question of how long it takes a country to "graduate" from the typical pattern of serial crisis that most emerging markets experience. We find that for default and inflation crises, twenty years is a significant market, but the distribution of recidivism has extremely fat tails. In the case of banking crises, it is unclear whether countries ever graduate. We also examine the more recent phenomenon of IMF programs, which sometimes result in "near misses" but sometimes end in default even after a program is instituted. The paper raises the important theoretical question of why countries experience serial default, and how they might graduate.

Suggested Citation

Qian, Rong and Reinhart, Carmen M. and Rogoff, Kenneth S., On Graduation from Default, Inflation and Banking Crisis: Elusive or Illusion? (July 2010). NBER Working Paper No. w16168. Available at SSRN: https://ssrn.com/abstract=1638264

Rong Qian (Contact Author)

affiliation not provided to SSRN ( email )

Carmen M. Reinhart

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kenneth S. Rogoff

Harvard University - Department of Economics ( email )

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Room 232
Cambridge, MA 02138
United States
617-495-4022 (Phone)
617-495-7730 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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