American Economic Review Vol. 101 No. 5 2011

From Financial Crash to Debt Crisis

Carmen Reinhart¹; Kenneth Rogoff²

¹ Peterson Institute for International Economics, 1750 Massachusetts Avenue NW, Washington, DC 20036, NBER, and CEPR. · ² Department of Economics, Harvard University, 1875 Cambridge Street, Cambridge, MA 02138 and NBER.

Abstract

Newly developed historical time series on public debt, along with data on external debts, allow a deeper analysis of the debt cycles underlying serial debt and banking crises. We test three related hypotheses at both “world” aggregate levels and on an individual country basis. First, external debt surges are an antecedent to banking crises. Second, banking crises (domestic and those in financial centers) often precede or accompany sovereign debt crises; we find they help predict them. Third, public borrowing surges ahead of external sovereign default, as governments have “hidden domestic debts” that exceed the better documented levels of external debt.

DOI

10.1257/aer.101.5.1676

Volume

101

Issue

5

Pages

1676-1706

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

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