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"Rules of thumb" for sovereign debt crises

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  • Manasse, Paolo
  • Roubini, Nouriel

Abstract

This paper investigates the economic and political conditions that are associated to the occurrence of a sovereign debt crisis. We use a new statistical approach (Classification and Regression Tree) that allows us to derive a collection of "rules of thumb" that help identify the typical characteristics of defaulters. We find that not all crises are equal: they differ depending on whether the government faces insolvency, illiquidity, or various macroeconomic risks. We also characterize the set of fundamentals that can be associated with a relatively "risk-free" zone. This classification is important for discussing appropriate policy options to prevent crises and improve response time and prediction.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 78 (2009)
Issue (Month): 2 (July)
Pages: 192-205

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Handle: RePEc:eee:inecon:v:78:y:2009:i:2:p:192-205

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Web page: http://www.elsevier.com/locate/inca/505552

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Keywords: Sovereign debt Crises Default;

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References

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  1. Catherine A. Pattillo & Andrew Berg, 1998. "Are Currency Crises Predictable? a Test," IMF Working Papers 98/154, International Monetary Fund.
  2. Enrica Detragiache & Antonio Spilimbergo, 2001. "Crises and Liquidity," IMF Working Papers 01/2, International Monetary Fund.
  3. Curzio Giannini & Carlo Cottarelli, 2002. "Bedfellows, Hostages, or Perfect Strangers? Global Capital Markets and the Catalytic Effect of IMF Crisis Lending," IMF Working Papers 02/193, International Monetary Fund.
  4. Guillermo Larraín & Helmut Reisen & Julia von Maltzan, 1997. "Emerging Market Risk and Sovereign Credit Ratings," OECD Development Centre Working Papers 124, OECD Publishing.
  5. Jonathan Eaton & Raquel Fernandez, 1995. "Sovereign Debt," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 59, Boston University, Institute for Economic Development.
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  7. Axel Schimmelpfennig & Nouriel Roubini & Paolo Manasse, 2003. "Predicting Sovereign Debt Crises," IMF Working Papers 03/221, International Monetary Fund.
  8. repec:rus:hseeco:123922 is not listed on IDEAS
  9. Swart R. Ghosh & Atish R. Ghosh, 2002. "Structural Vulnerability and Currency Crises," IMF Working Papers 02/9, International Monetary Fund.
  10. Andrew Berg & Eduardo Borensztein & Catherine Pattillo, 2005. "Assessing Early Warning Systems: How Have They Worked in Practice?," IMF Staff Papers, Palgrave Macmillan, vol. 52(3), pages 5.
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  14. Diego Saravia & Ashoka Mody, 2003. "Catalyzing Capital Flows," IMF Working Papers 03/100, International Monetary Fund.
  15. Witold J. Henisz, 2002. "The institutional environment for infrastructure investment," Industrial and Corporate Change, Oxford University Press, vol. 11(2), pages 355-389.
  16. Marcos Chamon & Paolo Manasse & Alessandro Prati, 2007. "Can We Predict the Next Capital Account Crisis?," IMF Staff Papers, Palgrave Macmillan, vol. 54(2), pages 270-305, June.
  17. Richard Cantor & Frank Packer, 1996. "Determinants and impacts of sovereign credit ratings," Research Paper 9608, Federal Reserve Bank of New York.
  18. Giovanni Dell'Ariccia & Jeromin Zettelmeyer & Isabel Schnabel, 2002. "Moral Hazard and International Crisis Lending: A Test," IMF Working Papers 02/181, International Monetary Fund.
  19. 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.
  20. Jeffrey A. Frankel & Shang-Jin Wei, 2004. "Managing Macroeconomic Crises," NBER Working Papers 10907, National Bureau of Economic Research, Inc.
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  22. Jeanne, Olivier, 2000. "Debt Maturity and the Global Financial Architecture," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2520, C.E.P.R. Discussion Papers.
  23. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Più Europa (e meno Spagna). O no?
    by Alberto Bagnai in Goofynomics on 2012-05-11 20:28:00
  2. Più Europa (e meno Spagna). O no?
    by redazione in Appello al popolo on 2012-05-12 18:18:08
  3. Frenkel goes to Latvia
    by Alberto Bagnai in Goofynomics on 2013-12-30 16:14:00
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