Sovereign defaults reveal hidden costs and economic vulnerabilities in emerging economies.
Sovereign defaults happen when a country can't pay its debts. This can happen when the country doesn't have enough money, borrowing is expensive, or there are political changes. Defaults can lead to costs for both the country and its creditors. After a default, the country and creditors usually work out a new payment plan. This can involve paying less money or taking longer to pay back the debt. Understanding sovereign defaults can help explain economic issues in developing countries.