Systemic and Idiosyncratic Sovereign Debt Crises
The theoretical literature on sovereign defaults has focused on adverse shocks to debtors’ economies, suggesting that defaults are of an idiosyncratic nature. Still, sovereign debt crises are also of a systemic nature, clustered around panics in the financial center such as the European Sovereign Debt Crisis in the aftermath of the U.S. Subprime Crisis in 2008. Crises in the financial centers are rare disasters and thus, their effects on the periphery can only be captured by examining long episodes. This paper examines sovereign defaults from 1820 to the Great Depression, with a focus on Latin America. We find that 63% of the crises are of a systemic nature. These crises are different. Both the international collapse of liquidity and the growth slowdown in the financial centers are at their core. These global shocks trigger longer default spells and larger investors’ losses.
Published Versions
Systemic and Idiosyncratic Sovereign Debt Crises, Graciela Laura Kaminsky, Pablo Vega-García. in Sovereign Debt and Financial Crises, Kalemli-Özcan, Reinhart, and Rogoff. 2016
Graciela Laura Kaminsky & Pablo Vega-García, 2016. "SYSTEMIC AND IDIOSYNCRATIC SOVEREIGN DEBT CRISES," Journal of the European Economic Association, vol 14(1), pages 80-114. citation courtesy of 
Related
More from NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Retirement and Disability, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
