The Costs of Sovereign Default

Author/Editor:

Eduardo Borensztein ; Ugo Panizza

Publication Date:

October 1, 2008

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper evaluates empirically four types of cost 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:

Working Paper No. 08/238

Subject:

Frequency:

Quarterly

English

Publication Date:

October 1, 2008

ISBN/ISSN:

9781451870961/1018-5941

Stock No:

WPIEA2008238

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

50

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