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40 years of sovereign debt crises

Author

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  • Cohen, Daniel
  • Valadier, Cécile

Abstract

The paper compiles a new data base, based on the earlier work by Kray and Nehu, to assess the determinants of sovereign debt crises over the last forty years. A simple statistical analysis of the cause of the crises is performed. It shows that neither the serial defaulter nor the "global crisis" theories of sovereign crises explain much. Sovereign debt crises owe mostly to the level of indebtedness of the countries. About half the risk factor such as we shall compute it originates from this term. The remainder owes for another 25% to the quality of governance of the country, such as captured by the CPIA index which measures indirectly the ability of countries to wither external bad shock. On these fronts, we show that the bulk of countries which were at the center of previous crises are now below the danger zone, which explains why, for them, this crisis was different.

Suggested Citation

  • Cohen, Daniel & Valadier, Cécile, 2011. "40 years of sovereign debt crises," CEPR Discussion Papers 8269, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8269
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    References listed on IDEAS

    as
    1. Mr. Luc Laeven & Mr. Fabian Valencia, 2010. "Resolution of Banking Crises: The Good, the Bad, and the Ugly," IMF Working Papers 2010/146, International Monetary Fund.
    2. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
    3. Dale F. Gray & Robert C. Merton & Zvi Bodie, 2007. "New Framework for Measuring and Managing Macrofinancial Risk and Financial Stability," NBER Working Papers 13607, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Daniel Cohen & Sébastien Villemot, 2012. "The sovereign default puzzle: Modelling issues and lessons for Europe," PSE Working Papers halshs-00692038, HAL.
    2. Cohen, Daniel & Villemot, Sébastien, 2015. "Endogenous debt crises," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 337-369.
    3. Sri Hari NAIDU. A & Phanindra GOYARI & Bandi KAMAIAH, 2016. "Determinants of sovereign bond yields in emerging economies: Some panel inferences," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(608), A), pages 101-118, Autumn.
    4. Jean-Marc Fournier & Manuel Bétin, 2018. "Sovereign defaults: Evidence on the importance of government effectiveness," OECD Economics Department Working Papers 1494, OECD Publishing.
    5. Carré, Sylvain & Cohen, Daniel & Villemot, Sébastien, 2019. "The sources of sovereign risk: a calibration based on Lévy stochastic processes," Journal of International Economics, Elsevier, vol. 118(C), pages 31-43.
    6. Jean-Marc Fournier & Manuel Bétin, 2018. "Limits to government debt sustainability in middle-income countries," OECD Economics Department Working Papers 1493, OECD Publishing.

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    More about this item

    Keywords

    Debt crises;

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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