Sovereign default shocks rarely remain isolated within national borders; they spread rapidly through global financial markets via international capital flows and Flight to Safety channels.
The Sovereign Contagion Pipeline
[Domestic Sovereign Risk Rises] 
           |
           v
[Global Capital Flees Local Assets] ---------> Triggers severe local currency depreciation
           |
           v
[International Investors Shift to Safe Havens] -> Drives up yields across neighboring emerging markets
           |
           v
[Systemic Cross-Border Debt Crisis] -----------> Realizes global contagion shocks

 
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