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Sovereign Debt Crises

topic v1.0.0 2026-04-05 Agent-extracted

How public debt levels fiscal sustainability and debt crises affect economic growth financial stability and development outcomes

Download .pax.tar.gz 2.5 KB

Domain: Sovereign Debt and Fiscal Crises

How public debt levels fiscal sustainability and debt crises affect economic growth financial stability and development outcomes

Period: 1970-present Population: Countries worldwide Level: macro

Overview

6
Constructs
3
Findings
3
Engines

Constructs

public_debt_to_gdp Public Debt to GDP

Central government gross debt as percentage of gross domestic product measuring overall public indebtedness

debt_service_exports_pct Debt Service to Exports Ratio

Total debt service payments including principal and interest as percentage of exports of goods and services

sovereign_credit_rating_numeric Sovereign Credit Rating Numeric

Numerical encoding of sovereign credit ratings from AAA equals 21 to D equals 1 enabling quantitative analysis

fiscal_balance_gdp Fiscal Balance GDP Share

General government net lending or borrowing as percentage of GDP where positive values indicate fiscal surplus

foreign_reserves_import_months Foreign Reserves in Import Months

Total foreign exchange reserves measured in months of imports coverage indicating external liquidity buffer

government_bond_yield_10y Government Bond Yield 10 Year

Yield to maturity on benchmark 10-year government bonds in domestic currency reflecting sovereign borrowing cost

Findings

Debt crises are more likely when sovereign debt is denominated in foreign currency a phenomenon known as original sin

Direction: positive Confidence: strong Method: historical event analysis

Foreign reserve adequacy measured in import months is negatively associated with the probability of experiencing a sovereign debt crisis

Direction: negative Confidence: strong Method: probit regression with early warning indicators

Fiscal deterioration typically precedes sovereign credit rating downgrades by 12 to 18 months creating a predictable lag pattern

Direction: negative Confidence: moderate Method: event study with Granger causality

Engines

ols_regression logistic_regression event_study

Sources

Reinhart, Carmen, Rogoff, Kenneth (2009). This Time Is Different Eight Centuries of Financial Folly
Herndon, Thomas, Ash, Michael, Pollin, Robert (2014). Does high public debt consistently stifle economic growth a critique of Reinhart and Rogoff DOI
Abbas, Ali, Belhocine, Nazim, ElGanainy, Asmaa, Horton, Mark (2011). Historical patterns and dynamics of public debt
Eichengreen, Barry, Hausmann, Ricardo, Panizza, Ugo (2005). The pain of original sin

Tags

topicsovereign-debt

Details

Domain: Sovereign Debt and Fiscal Crises

How public debt levels fiscal sustainability and debt crises affect economic growth financial stability and development outcomes

Temporal scope: 1970-present | Population: Countries worldwide

Key Findings

  • Debt crises are more likely when sovereign debt is denominated in foreign currency a phenomenon known as original sin (positive, strong)
  • Foreign reserve adequacy measured in import months is negatively associated with the probability of experiencing a sovereign debt crisis (negative, strong)
  • Fiscal deterioration typically precedes sovereign credit rating downgrades by 12 to 18 months creating a predictable lag pattern (negative, moderate)

Installation

Install this PAX into your Praxis instance:

praxis_import_pax("sovereign-debt-crises.pax.tar.gz", install=True)