Abstract: This paper investigates the causal effects of sovereign debt crises in a sample of 50 defaulting economies between 1870 and 2010. As default is potentially endogenous, we use the narrative approach to identify plausibly exogenous episodes. We find economically and statistically significant costs of up to 3.2 percent of GDP before recovering to the pre-crisis level after five years. The average aftermath, however, conceals a large heterogeneity by default cause. Defaults originating from negative supply shocks, political crises, or adverse terms of trade are associated with higher costs. Demand shocks, in contrast, have a moderate effect that is quickly reversed.
JEL Classification: E32, F34, F41, G01, H63, N10, N20
Keywords: Business cycles, narrative approach, sovereign debt crises
Cite this paper: Esteves R, Kenny S, Lennard J. The Aftermath of Sovereign Debt Crises: A Narrative Approach. The Journal of Economic History. Published online 2026:1-40. doi:10.1017/S0022050725100995
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