Varieties of sovereign crises: Latin America, 1820-1931

Available from: 
October 2013
Paper author(s): 
Pablo Vega-Garcia (George Washington University)
Graciela Laura Kaminsky (George Washington University)
History and Economics
Macroeconomics - Economic growth - Monetary Policy

During the first period of financial globalization (1820-1931) there were sixty seven sovereign default episodes in Latin America, with all the countries defaulting at least once. This paper creates an anatomy of debt defaults, renegotiations, losses, and the re-entering in international capital markets and links this anatomy to the economic and financial evolution of the global economy, the financial centers, and the periphery. We keep track of the renegotiations and we estimate the investors’ losses and countries’ debt relief. We also examine the macroeconomic characteristics of the domestic economies that determine the duration of the default spell. These one hundred years of defaults also allows us to make a distinction between defaults following crises in the periphery, such as the coffee crisis in Brazil in 1898 or the revolutionary war in Mexico in 1914, and the defaults following crises in the financial center, such as the ones in 1825, 1873, 1890, and 1931. In particular we examine whether defaults are caused by sustainability or liquidity problems. Finally, we study the ability of defaulting countries to re-enter capital markets following crises with origin in the periphery and those with origin in the financial center. 


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Research section: 
Lacea 2013 annual meeting
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