A Study of Country-Risk for Non-Developed Countries in 1980-2000
AbstractThis article aims at discovering a coherent method for estimating country risk for non-developed countries, determining the components and most significant factors involved and thus avoiding the “black boxes” represented by external agency ratings. The data used form a panel of 40 non-developed countries, grouped into 5 geographical areas, during the 1985-2000 period (World Bank database, 2002). A credit rating is allocated to the countries concerned based on criteria similar to those applied to business solvency, and we then attempt to explain this rating by other macroeconomic factors obtained from the same database. The model employed to determine the probabilities corresponding to each individual at each moment in time and according to the allocated rating, is an ordered probit on panel data. The results obtained indicate that there is a high degree of time correlation in country credit ratings and, furthermore, that the probability of their insolvency is also influenced by random effects of heterogeneity.
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Bibliographic InfoArticle provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.
Volume (Year): 5 (2005)
Issue (Month): 1 ()
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Find related papers by JEL classification:
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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