ABSTRACT
It seems, indeed, that most countries have defaulted at least once in their history. As indicated in the previous chapter, most sovereign defaults seem to have happened when a sovereign’s previous fiscal or monetary policies left it little room for manoeuver, or when economic policy did not support sustained economic growth. In such cases investors’ positive perceptions may tend to quickly shift to a negative, leading to the rise of financing costs, leaving eventually a sovereign with default as the only policy response (Council of Foreign Relations, 2015). Unfortunately, aggregate effects of such happenings can also have a devastating macro effect both nationally and globally.
