A Simulation Estimation Analysis of the External Debt Crises of Developing Countries
AbstractIn this paper I develop models of the incidence and extent of external financing crises of developing countries, which lead to multiperiod multinomial discrete choice and discrete/continuous econometric specifications with flexible correlation structures in the unobservables. I show that estimation of these models based on simulation methods has attractive statistical properties and is computationally tractable. Three such simulation estimation methods are exposited, analyzed theoretically, and used in practice: a method of smoothly simulation maximum likelihood (SSML) based on a smooth recursive conditioning simulator (SRC), a method of simulated scores (MSS) based on a Gibbs sampling simulator (GSS), and an MSS estimator based on the SRC simulator. The data set used in this study comprises 93 developing countries observed through the 1970-1988 period and contains information on external financing responses that are not available to investigators in the past. Moreover, previous studies of external debt problems had to rely on restrictive correlation structures in the unobservables to overcome otherwise intractable computational difficulties. The findings show that being able for the first time to allow for flexible correlation patterns in the unobservables through estimation by simulation has a substantial impact on the parameter estimates obtained from such models. This suggests that past empirical results in this literature require a substantial reevaluation.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.
Volume (Year): 9 (1994)
Issue (Month): 2 (April-June)
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Web page: http://www.interscience.wiley.com/jpages/0883-7252/
Other versions of this item:
- Hajivassiliou, 1993. "A Simulation Estimation Analysis of the External Debt Crises of Developing Countries," Cowles Foundation Discussion Papers 1057, Cowles Foundation for Research in Economics, Yale University.
- Vassilis A. Hajivassiliou, 1993. "A Simulation Estimation Analysis of the External Debt Crises of Developing Countries," Working Papers _022, Yale University.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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