The aftermath of sovereign debt crises: a narrative approach

Esteves, Rui, Kenny, Seán and Lennard, Jason ORCID: 0000-0002-6700-8969 (2024) The aftermath of sovereign debt crises: a narrative approach. Journal of Economic History. ISSN 0022-0507

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Abstract

This paper investigates the causal effects of sovereign debt crises in a sample of 50 defaulting economies between 1870 and 2010. As default is potentially endogenous, we use the narrative approach to identify plausibly exogenous episodes. We find economically and statistically significant costs of up to 3.2% of GDP before recovering to the pre-crisis level after five years. The average aftermath, however, conceals a large heterogeneity by default cause. Defaults originating from negative supply shocks, political crises, or adverse terms of trade are associated with higher costs. Demand shocks, in contrast, have a moderate effect that is quickly reversed.

Item Type:	Article
Additional Information:	© 2024
Divisions:	Economic History
Subjects:	H Social Sciences > HC Economic History and Conditions
JEL classification:	E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles F - International Economics > F3 - International Finance > F34 - International Lending and Debt Problems F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt; Debt Management N - Economic History > N1 - Macroeconomics and Monetary Economics; Growth and Fluctuations > N10 - General, International, or Comparative N - Economic History > N2 - Financial Markets and Institutions > N20 - General, International, or Comparative
Date Deposited:	19 Nov 2024 09:57
Last Modified:	12 Dec 2024 04:34
URI:	http://eprints.lse.ac.uk/id/eprint/126096

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