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Abstract

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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Bibliographic Info

Article provided by Euro-American Association of Economic Development in its journal International Journal of Applied Econometrics and Quantitative Studies .

Volume (Year): 2 (2005)
Issue (Month): 3 ()
Pages: 99-133

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Handle: RePEc:eaa:ijaeqs:v:2:y2005:i:3_3

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Related research

Keywords: Country risk; panel data; external debt; dynamic ordered probit;

Find related papers by JEL classification:

• C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
• 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

References

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1. Vassilis A. Hajivassiliou & Axel Borsch-Supan, 1990. "Smooth Unbiased Multivariate Probability Simulators for Maximum Likelihood Estimation of Limited Dependent Variable Models," Cowles Foundation Discussion Papers 960, Cowles Foundation for Research in Economics, Yale University.
   
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2. Axel Borsch-Supan & Vassilis Hajivassiliou & Laurence J. Kotlikoff & John N. Morris, 1990. "Health, Children, and Elderly Living Arrangements: A Multiperiod-Multinomial Probit Model with Unobserved Heterogeneity and Autocorrelated Errors," NBER Working Papers 3343, National Bureau of Economic Research, Inc.
   
   • Axel Borsch-Supan & Vassilis Hajivassiliou & Laurence J. Kotlikoff, 1992. "Health, Children, and Elderly Living Arrangements: A Multiperiod-Multinomial Probit Model with Unobserved Heterogeneity and Autocorrelated Errors," NBER Chapters, in: Topics in the Economics of Aging, pages 79-108 National Bureau of Economic Research, Inc.
3. Wayne E. Ferson & Campbell R. Harvey, 1999. "Economic, Financial, and Fundamental Global Risk In and Out of the EMU," NBER Working Papers 6967, National Bureau of Economic Research, Inc.
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5. Campbell R. Harvey & Guofu Zhou, 1993. "International asset pricing with alternative distributional specifications," CEMA Working Papers 277, China Economics and Management Academy, Central University of Finance and Economics.
   
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9. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387.
   
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10. John Geweke & Michael Keane & David Runkle, 1994. "Alternative computational approaches to inference in the multinomial probit model," Staff Report 170, Federal Reserve Bank of Minneapolis.
    
    • Geweke, John & Keane, Michael P & Runkle, David, 1994. "Alternative Computational Approaches to Inference in the Multinomial Probit Model," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 609-32, November.
11. Lee, Suk Hun, 1993. "Are the credit ratings assigned by bankers based on the willingness of LDC borrowers to repay?," Journal of Development Economics, Elsevier, vol. 40(2), pages 349-359, April.
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18. Andrew Berg & Rebecca N. Coke, 2004. "Autocorrelation-Corrected Standard Errors in Panel Probits: An Application to Currency Crisis Prediction," IMF Working Papers 04/39, International Monetary Fund.

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