## Debt Crises and the Development of International Capital Markets

_IMF Working Papers, March 1, 2004_

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## Bibliographic details
- Authors: Amadou N Sy, Andrea Pescatori
- Published: March 1, 2004
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451846447.001

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### Definition and conceptual framework
- Debt crises are redefined to reflect changes in international capital markets: an event occurs when either a country defaults or its bond spreads are above a critical threshold.
- Rationale for redefinition:
  - The 1980s: crises characterized by numerous defaults on bank loans—defaults as a definition captures debt-servicing difficulties in this period.
  - The 1990s: emergence of sovereign bond markets; significant foreign debt-servicing difficulties occurred with fewer sovereign defaults, making a default-only definition problematic.

### Main empirical findings
- The proposed definition (default OR bond spreads above a critical threshold) outperforms the default-based definition in capturing debt-servicing difficulties.
- The proposed definition fits the post-1994 period better than the default-based definition.
- Liquidity indicators are significant in explaining the proposed definition of debt crises.
- Liquidity indicators do not play any role in explaining defaults after 1994.

### Key statements and emphases from the study
- "Crises on external sovereign debt are typically defined as defaults."
- "Defining defaults as debt crises is problematic for the 1990s, when sovereign bond markets emerged."
- "We find that our definition outperforms the default-based definition in capturing debt-servicing difficulties and, consequently, in fitting the post-1994 period."
- "In particular, liquidity indicators are significant in explaining our definition of debt crises, while they do not play any role in explaining defaults after 1994."

### Subjects and keywords
- Subject: Debt default, Financial crises, Securities markets, Sovereign bonds, Yield curve
- Keywords: crisis, debt, debt crisis, WP

*Source: IMF Working Paper "Debt Crises and the Development of International Capital Markets" by Amadou N Sy and Andrea Pescatori, March 1, 2004.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/debt-crises-and-the-development-of-international-capital-markets-17072_