Program > Papers by author > Passarelli Francesco

Monday 12
B4 - Fiscal Policies and Behavior of Economic Agents I
Chair: Besart Avdiu
› 13:40 - 14:05 (25min)
› Room 005 - E. Jaques-Dalcroze
Strategic Sovereign Defaults under International Sanctions
Edoardo Grillo  1@  , Carlo De Bassa  2@  , Francesco Passarelli  3@  
1 : Collegio Carlo Alberto  -  Website
Via Real Collegio 30 10024 Moncalieri -  Italy
2 : George Washington School of Business
3 : University of Turin

Sanctions induce political instability. We present a model where sanctioned regimes may decide to repudiate their public debts in order to keep internal support and avoid being overthrown. To be effective, this strategy requires the share of foreign debt to be sufficiently large. Combining datasets, we highlight that more than a third of all sovereign debt crises in the 1960-2005 period are connected to an
international sanction episode. Results con…rm a positive relation between sovereign defaults and sanctions’' destabilizing impact.

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