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
Date Written: August 2, 2016
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: Suggested Citation