This paper aims to give a detailed explanation of the econometric methodology necessary to estimate dynamic probit models with ordinal dependent variables. A typology of cases are established which appear when considering different choices of individual heterogeneity along with time correlation. To be able to estimate by maximum likelihood the models which come out of the different alternatives proposed, simulation techniques are used and put into practice by the GHK simulator and, in this way, estimators by simulated maximum likelihood are obtained. Finally, all the models described are used to measure and determine the macroeconomic factors which explain the ratings of country-risk in non-developed countries.
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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 C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models F34 - International Economics - - International Finance - - - International Lending and Debt Problems H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
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