Discussion paper

DP8269 40 years of sovereign debt crises

The paper compiles a new data base, based on the earlier work by Kray and Nehu, to assess the determinants of sovereign debt crises over the last forty years. A simple statistical analysis of the cause of the crises is performed. It shows that neither the serial defaulter nor the "global crisis" theories of sovereign crises explain much. Sovereign debt crises owe mostly to the level of indebtedness of the countries. About half the risk factor such as we shall compute it originates from this term. The remainder owes for another 25% to the quality of governance of the country, such as captured by the CPIA index which measures indirectly the ability of countries to wither external bad shock. On these fronts, we show that the bulk of countries which were at the center of previous crises are now below the danger zone, which explains why, for them, this crisis was different.


Cohen, D and C Valadier (2011), ‘DP8269 40 years of sovereign debt crises‘, CEPR Discussion Paper No. 8269. CEPR Press, Paris & London. https://cepr.org/publications/dp8269