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- Title
The Costs of Sovereign Default: Evidence from Argentina.
- Authors
Hébert, Benjamin; Schreger, Jesse
- 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. (JEL D22, F31, F34, G32, O14, O16, O19)
- Subjects
GOVERNMENT securities default; SOVEREIGN risk; PUBLIC debts; FOREIGN exchange rates; ARGENTINIAN economy; NML Capital Ltd.; TWENTY-first century; ACTIONS &; defenses (Law)
- Publication
American Economic Review, 2017, Vol 107, Issue 10, p3119
- ISSN
0002-8282
- Publication type
Article
- DOI
10.1257/aer.20151667