SOGEI website background

The social imprint of sovereign defaults

The social imprint of sovereign defaults

Concerns over sovereign debt sustainability have grown since the Russian invasion of Ukraine and the pivot towards policy tightening by many central banks. But while the aggregate economic consequences of debt distress have been widely examined in the literature, the broader societal dislocations have received less attention. This column traces out the paths on a variety of measures of poverty and performance in the aftermath of 131 defaults since 1900. The findings point to the potential existence of vicious cycles, as the human costs of default are in turn likely to make a country more vulnerable to political and social unrest and future financial crises.