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How Costly Are Debt Crises?

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  • Davide Furceri
  • Ms. Aleksandra Zdzienicka

Abstract

The aim of this paper is to assess the short- and medium-term impact of debt crises on GDP. Using an unbalanced panel of 154 countries from 1970 to 2008, the paper shows that debt crises produce significant and long-lasting output losses, reducing output by about 10 percent after eight years. The results also suggest that debt crises tend to be more detrimental than banking and currency crises. The significance of the results is robust to different specifications, identification and endogeneity checks, and datasets.

Suggested Citation

  • Davide Furceri & Ms. Aleksandra Zdzienicka, 2011. "How Costly Are Debt Crises?," IMF Working Papers 2011/280, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2011/280
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    More about this item

    Keywords

    WP; debt crisis; crisis episode; debt; output losses; debt crises; sovereign defaults; output growth; bond debt default; banking sector crisis; crisis output; debt crisis output; debt-currency-banking crisis; occurrence of a debt crisis; currency crises episode; debt crises t; identification of debt crisis episode; debt t; onset of a debt crisis; Debt default; Currency crises; Production growth; Global; Africa;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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