This article discusses the economics of sovereign defaults, summarizing lessons from existing work on this issue. In particular, the article describes the costs associated with a sovereign default episode, identifies circumstances that are likely to lead to a default, and discusses how...

This paper studies the impact of sovereign debt rating changes on liquidity for stocks from 40 countries for the period 1990-2009. We find that sovereign rating changes significantly affect stock liquidity. The impact is stronger for downgrades than for upgrades, and is nonlinear in event size....

Sovereign debt crises have been recurrent events over the past two centuries. In recent years, the timing of sovereign crises has coincided or has directly followed banking crises. The link between sovereigns and banks tightened as the contingent liability that the banking sector represents for...