American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Costs of Sovereign Default: Evidence from Argentina
American Economic Review
vol. 107,
no. 10, October 2017
(pp. 3119–45)
Abstract
We estimate the causal effect of sovereign default on the equity returns of Argentine firms. We identify this effect by exploiting changes in the probability of Argentine sovereign default induced by legal rulings in the case of NML Capital, Ltd. v. Republic of Argentina. We find that a 10 percent increase in the probability of default causes a 6 percent decline in the value of Argentine equities and a 1 percent depreciation of a measure of the exchange rate. We examine the channels through which a sovereign default may affect the economy.Citation
Hébert, Benjamin, and Jesse Schreger. 2017. "The Costs of Sovereign Default: Evidence from Argentina." American Economic Review, 107 (10): 3119–45. DOI: 10.1257/aer.20151667Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- F31 Foreign Exchange
- F34 International Lending and Debt Problems
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O19 International Linkages to Development; Role of International Organizations