Life After Default. Private and Official Deals

68 Pages Posted: 18 Feb 2020

See all articles by Silvia Marchesi

Silvia Marchesi

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS); University of Milan - Centro Studi Luca d'Agliano (LdA) ; Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

Tania Masi

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

Date Written: February 14, 2020

Abstract

This paper studies the relationship between sovereign debt default and annual GDP growth distinguishing between private and official deals. Using the Synthetic Control Method to analyze 23 official and private defaulters from 1970 to 2017, we find that private defaults generate output losses both during the crisis and persisting over time. Conversely, official defaulters do not show a permanent drop in GDP per capita, neither during the crisis nor in its aftermath. Using panel data analysis to control for the creditors' loss (haircut), we confirm that official and private defaults may have different effects on GDP growth.

Keywords: Sovereign defaults, Output losses, Synthetic control method

JEL Classification: F34, G15, H63

Suggested Citation

Marchesi, Silvia and Masi, Tania, Life After Default. Private and Official Deals (February 14, 2020). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 431, Available at SSRN: https://ssrn.com/abstract=3538312 or http://dx.doi.org/10.2139/ssrn.3538312

Silvia Marchesi (Contact Author)

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy
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HOME PAGE: http://https://sites.google.com/site/ssilviamarchesi/home

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy

University of Milan - Centro Studi Luca d'Agliano (LdA)

Via P. Amedeo 34
Milano, Mi 20122
Italy

Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

Tania Masi

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

U6 Building
Viale Piero e Alberto Pirelli, 22
Milano, 20126
Italy

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