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Economic Quarterly

Spring 2007

The Economics of Sovereign Defaults

Juan Carlos Hatchondo, Leonardo Martinez and Horacio Sapriza

This article discusses the economics of sovereign defaults, summarizing lessons from existing work on this issue. In particular, the article describes the costs associated with a sovereign default episode, identifies circumstances that are likely to lead to a default, and discusses how understanding sovereign defaults may help to account for distinctive economic features of emerging economies.

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