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The Macroeconomic Imbalance Procedure: A useful tool for predicting sovereign crises?

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  • Alfredo Arahuetes García
  • Gonzalo Gómez Bengoechea

Abstract

This paper provides an empirical analysis of the Macroeconomic Imbalance Procedure (MIP). It explores the relationship between sovereign bond yields spreads and the variables contained in the MIP scoreboard using quantile regressions. Results suggest that MIP indicators can explain the behavior of sovereign spreads two, three and four quarters in advance. The scoreboard can’t capture strong non-variant country effects that affect the evolution of spreads as well as the different impact that each indicator has on different countries. The introduction of employment indicators has reduced the aggregate effect that country effects have on sovereign spreads.

Suggested Citation

  • Alfredo Arahuetes García & Gonzalo Gómez Bengoechea, 2018. "The Macroeconomic Imbalance Procedure: A useful tool for predicting sovereign crises?," Estudios de Economia, University of Chile, Department of Economics, vol. 45(1 Year 20), pages 79-111, June.
    • Handle: RePEc:udc:esteco:v:45:y:2018:i:1:p:79-111
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    File URL: https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/49266
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    References listed on IDEAS

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    Cited by:

    1. Maria Siranova & Karol Zelenak, 2023. "Every crisis does matter: Comparing the databases of financial crisis events," Review of International Economics, Wiley Blackwell, vol. 31(2), pages 652-686, May.

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    More about this item

    Keywords

    Sovereign spreads; quantile regressions; Macroeconomic Imbalance Procedure;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • N2 - Economic History - - Financial Markets and Institutions

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