Balance Sheets and Debt Crises – Empirical Regularities for Modern Cases of Sovereign Distress

58 Pages Posted: 4 Feb 2022

See all articles by Gonzalo Huertas

Gonzalo Huertas

Independent

Alexis Mayer Cirkel

International Monetary Fund (IMF)

Date Written: May 1, 2021

Abstract

Public and private sector balance sheets are an important component to any analysis of debt sustainability. A vulnerable and indebted private sector can become a sudden liability for the government; alternatively, resilient household and bank balance sheets may reveal potential sources of funding for the sovereign during times of fiscal distress. In this paper, we document empirical regularities in the behavior of macroeconomic variables during debt crises, and show how both macroeconomic fundamentals and sectoral net worth can affect the likelihood of undergoing default.

Keywords: balance sheet dynamics, default probability, sectoral balance sheets, default episode, predicting default, banking sector balance sheet data, Financial statements, Commercial banks, Debt default, Global

JEL Classification: F31, E26, H83, G01, G21, H63, F34

Suggested Citation

Huertas, Gonzalo and Mayer Cirkel, Alexis, Balance Sheets and Debt Crises – Empirical Regularities for Modern Cases of Sovereign Distress (May 1, 2021). IMF Working Paper No. 2021/125, Available at SSRN: https://ssrn.com/abstract=4026300

Alexis Mayer Cirkel

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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