IMF Working Papers Volume 2019 Issue 069: Costs of Sovereign Defaults: Restructuring Strategies, Bank Distress and the Capital Inflow-Credit Channel (2019)

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Costs of Sovereign Defaults: Restructuring Strategies, Bank Distress and the Capital Inflow-Credit Channel

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Mr. Tamon Asonuma

Mr. Tamon Asonuma
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Mr. Marcos d Chamon

Mr. Marcos d Chamon
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Aitor Erce

Aitor Ercenull

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Akira Sasahara

Akira Sasaharanull

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Series:: IMF Working Papers

Volume/Issue:: Volume 2019: Issue 069

Publication Date:: 25 Mar 2019

DOI:: https://doi.org/10.5089/9781498303255.001

ISBN:: 9781498303255

ISSN:: 1018-5941

Pages:: 91

Keywords:: WP; net capital; growth rate; banking sector; Sovereign Debt; Sovereign Defaults; Sovereign Debt Restructurings; GDP Growth; Investment; Banking Crisis; Local Projection; debt restructuring; net capital capital inflow; default restructuring; inflows-to-GDP ratio; Debt restructuring; Capital inflows; Sudden stops; Banking crises; Credit; Global

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 2019: Issue 069

Language:: English

Publication Date:: 25 Mar 2019

DOI:: https://doi.org/10.5089/9781498303255.001

ISBN:: 9781498303255

ISSN:: 1018-5941

Pages:: 91

Keywords:: WP; net capital; growth rate; banking sector; Sovereign Debt; Sovereign Defaults; Sovereign Debt Restructurings; GDP Growth; Investment; Banking Crisis; Local Projection; debt restructuring; net capital capital inflow; default restructuring; inflows-to-GDP ratio; Debt restructuring; Capital inflows; Sudden stops; Banking crises; Credit; Global

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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Sovereign debt restructurings are associated with declines in GDP, investment, bank credit, and capital flows. The transmission channels and associated output and banking sector costs depend on whether the restructuring takes place preemptively, without missing payments to creditors, or whether it takes place after a default has occurred. Post-default restructurings are associated with larger declines in bank credit, an increase in lending interest rates, and a higher likelihood of triggering a banking crisis than pre-emptive restructurings. Our local projection estimates show large declines in GDP, investment, and credit amplified by severe sudden stops and transmitted through a “capital inflow-credit channel”.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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