The Economic Impact of Sovereign Defaults in Latin America 1870-2012

Revista de Historia Económica, Journal of Iberian and Latin American Economic History, 2016

Posted: 29 Dec 2016

See all articles by Tjeerd M. Boonman

Tjeerd M. Boonman

Banco de Mexico - Financial Stability Division

Date Written: August 2, 2016

Abstract

This article analyzes sovereign debt defaults in four Latin American countries — Argentina, Brazil, Chile and Mexico — for the period 1870-2012. The impact of sovereign defaults on real GDP growth is generally short-lived, while the impact in terms of output losses is deep and lasts long. Defaults in the period 1972-2012 show a deep and long-lasting impact compared to defaults in earlier periods. Moreover, the length of the contraction that follows a default is associated with favourable international conditions in the run-up to a default, while the depth of the contraction is associated with an expansive domestic economy in the run-up to a default. The results fit with boom–bust theories and sudden stop models.

Keywords: sovereign debt defaults, Latin America, economic impact

JEL Classification: G01, H63, N16

Suggested Citation

Boonman, Tjeerd M., The Economic Impact of Sovereign Defaults in Latin America 1870-2012 (August 2, 2016). Revista de Historia Económica, Journal of Iberian and Latin American Economic History, 2016. Available at SSRN: https://ssrn.com/abstract=2891052

Tjeerd M. Boonman (Contact Author)

Banco de Mexico - Financial Stability Division ( email )

Av. 5 de Mayo 18
Piso 4
Mexico City, 06059
Mexico
+52 55 5237 2000 ext 2047 (Phone)

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