How Do Real Exchange Rates Vary in Hard and Soft Sovereign Defaults?

Abstract: Sovereign defaults differ tremendously in creditor losses. Existing research has established that hard defaults (large creditor loss defaults) are associated with worse outcomes for GDP per capita than soft defaults. In this article, we document that hard defaults also feature worse real exchange rate depreciations.

Keywords: exchange rates; sovereign defaults; GDP; hard default; soft default;

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Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2022-10

Volume: 22

Issue: 40