Discussion paper

DP18300 I (Don't) Owe You: Sovereign Default and Borrowing Behavior

Using microdata from a U.S. household survey, we document that immigrants who lived through a sovereign default episode are 6\% less likely to hold debt relative to otherwise similar immigrants who reside in the same U.S. state and come from the same foreign country but who did not experience a default. Conditional on holding debt, consumers in the former group borrow less and service lower debt burdens. The negative effect on borrowing behavior of having experienced a sovereign default increases with family size and declines with education. These findings highlight the role of personal experience in shaping households' financial decisions.


Georgarakos, D and A Popov (2023), ‘DP18300 I (Don't) Owe You: Sovereign Default and Borrowing Behavior‘, CEPR Discussion Paper No. 18300. CEPR Press, Paris & London. https://cepr.org/publications/dp18300