IMF Staff Papers

IMF Staff Papers, Volume 56, No. 4

Publication Date:

November 4, 2009

Summary:

This paper empirically evaluates four types of costs that may result from an international sovereign default: reputational costs, international trade exclusion costs, costs to the domestic economy through the financial system, and political costs to the authorities. It finds that the economic costs are generally significant but short-lived, and sometimes do not operate through conventional channels. The political consequences of a debt crisis, by contrast, seem to be particularly dire for incumbent governments and finance ministers, broadly in line with what happens in currency crises.

Series:

IMF Staff Papers No. 2009/004

Subject:

Banking Economic integration External debt Financial markets Foreign exchange Monetary unions Production Real effective exchange rates Stock markets Total factor productivity Trade credits