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THE ECONOMIC IMPACT OF SOVEREIGN DEFAULTS IN LATIN AMERICA 1870-2012*

  • Tjeerd Menno Boonman (a1)
Abstract
ABSTRACT

This article analyzes sovereign debt defaults in four Latin American countries—Argentina, Brazil, Chile and Mexico—for the period 1870-2012. The impact of sovereign defaults on real GDP growth is generally short-lived, while the impact in terms of output losses is deep and lasts long. Defaults in the period 1972-2012 show a deep and long-lasting impact compared to defaults in earlier periods. Moreover, the length of the contraction that follows a default is associated with favourable international conditions in the run-up to a default, while the depth of the contraction is associated with an expansive domestic economy in the run-up to a default. The results fit with boom–bust theories and sudden stop models.

RESUMEN

Este artículo analiza impagos de deuda soberana en cuatro países Latinoamericanos— Argentina, Brasil, Chile y México— en el periodo 1870-2012. El impacto sobre el crecimiento del PIB real es generalmente de corta duración, mientras que las pérdidas acumuladas del producto son más profundas y duraderas. Los impagos durante el periodo 1972-2012 tienen un impacto más profundo y más duradero comparado con impagos en periodos anteriores. Adicionalmente, la duración de la contracción posterior al impago es asociado con favorables condiciones internacionales, mientras que la profundidad de la contracción es asociada con una expansión económica doméstica en el periodo antes de la crisis. Los resultados son consistentes con las teorías de boom-bust y los modelos de sudden stop.

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The author thanks Luis Anaya, Javier Arnaut, Arturo Bernal, Gerald Dwyer, Greetje Frankena, Jim Gerber, Isai Guizar, Jan Jacobs, Gerard Kuper, Ali Kutan, Juan Manuel Rivera, Anna Samarina, Elmer Sterken, Ivan Valdovinos, Gaaitzen de Vries, participants at the FRESH 2012 London meeting at LSE; the 11th INFINITI Conference on International Finance, Aix en Provence; and seminar participants at Tecnológico de Monterrey campus Guadalajara for their valuable contributions. The opinions expressed here are those of the author and do not necessarily represent Banco de Mexico’s or its board of governors’ opinions.

a

Banco de México, Dirección General de Estabilidad Financiera, Dirección de Análisis de Riesgos Macrofinancieros, Av. 5 de Mayo 1-1er Piso Col. Centro, México D.F., 06059, México, University of Groningen. tboonman@banxico.org.mx

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Revista de Historia Economica - Journal of Iberian and Latin American Economic History
  • ISSN: 0212-6109
  • EISSN: 2041-3335
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