'Rules of Thumb' for Sovereign Debt Crises
AbstractThis 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 InfoPaper provided by EconWPA in its series International Finance with number 0509003.
Date of creation: 06 Sep 2005
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Sovereign Default; Debt Crises;
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- F3 - International Economics - - International Finance
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
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