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Sovereign Debt Defaults: Evidence using Extreme bounds Analysis

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  • Zeaiter, Hussein Zeaiter

    ()
    (Lebanese American University)

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    Abstract

    This paper investigates the determinants of sovereign debt defaults using Extreme Bounds Analysis (EBA). The EBA approach is applied for 190 countries over the period 1970 2010 to determine whether economic and political factors are “robust” or “fragile”. This study finds that debt accumulated arrears can be perceived as an early signal for default and alarm countries to prevent total failure or at least alleviate the severity of the default. Also, this study recommends that the debtor country should (1) attract more foreign reserves through adjusting domestic policies and regulations of investment,(2) control debt by adopting a debt ratio ceiling, and (3) have proactive fiscal policies.

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    File URL: http://siupt.uportu.pt/content/files/dcee/Investigacao/WP_32_2013.pdf
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    Bibliographic Info

    Paper provided by Universidade Portucalense, Centro de Investigação em Gestão e Economia (CIGE) in its series Working Papers with number 32/2013.

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    Length: 38 pages
    Date of creation: 27 May 2013
    Date of revision:
    Handle: RePEc:ris:cigewp:2013_032

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    Postal: Universidade Portucalense – Economics and Management Department (CIGE – Centro de Investigação em Gestão e Economia), Rua Dr. António Bernardino de Almeida, 541-619, 4200 – 072 Porto, Portugal
    Web page: http://www.uportu.pt/site-scripts/centro_pagina.asp?codmenu=71&codcentro=24
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    Related research

    Keywords: sovereign debt; Extreme bounds analysis; panel data;

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