NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Costs of Sovereign Default: Evidence from Argentina

Benjamin Hébert, Jesse Schreger

NBER Working Paper No. 22270
Issued in May 2016
NBER Program(s):Asset Pricing, Economic Fluctuations and Growth, International Finance and Macroeconomics

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 Republic of Argentina v. NML Capital. We find that a 10% increase in the probability of default causes a 6% decline in the value of Argentine equities and a 1% depreciation of a measure of the exchange rate. We examine the channels through which a sovereign default may affect the economy.

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Document Object Identifier (DOI): 10.3386/w22270

Published: Benjamin Hébert & Jesse Schreger, 2017. "The Costs of Sovereign Default: Evidence from Argentina," American Economic Review, vol 107(10), pages 3119-3145.

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