Financial Crises: Explanations, Types, and Implications; by Stijn Claessens and M. Ayhan Kose; imf working Paper 13/28; January 1, 2013

External sovereign debt crises are generally easy to identify as well, although there remain 

differences in classifications across studies. Sovereign defaults are relatively easy to identify 

since they involve a unique event, the default on payments. Typical dating of such episodes 

relies on the classification of rating agencies or on information from international financial 

institutions (see McFadden, Eckaus, Feder, and Hajivassiliou (1984); and papers summarized 

in Sturzenegger and Zettelmeier (2007)). Still, there are choices in terms of methodology. For 

example differences arise from considering the magnitude of defaults (whether default has to 

be widespread or on just one class of claims), default by type of claims (such as bank claims 

or bond claims, private or public claims), and the length of default (missing a single or 

several payments). Others look instead at the increases in spreads in sovereign bonds as an 

indicator of (the probability of) default (Edwards, 1984). 

 

The end of a default is harder to date though. A major issue with dating, including of default 

and sovereign debt crises, can be identifying their end, i.e., when default is over. Some 

studies date this as when countries regained access in some form to private financial markets. 

Others use as a criteria when countries regain a certain credit rating (IMF, 2005 and 2011). 

Differences consequently arise as to how long it takes for a country to emerge after a 

sovereign default.