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A Study of Country-Risk for Non-Developed Countries in 1980-2000

  • Gonzalez, M.

    ()

  • Minguez, R.

    ()

This article aims at discovering a coherent method for estimating country risk for non-developed countries, determining the components and most significant factors involved and thus avoiding the “black boxes” represented by external agency ratings. The data used form a panel of 40 non-developed countries, grouped into 5 geographical areas, during the 1985-2000 period (World Bank database, 2002). A credit rating is allocated to the countries concerned based on criteria similar to those applied to business solvency, and we then attempt to explain this rating by other macroeconomic factors obtained from the same database. The model employed to determine the probabilities corresponding to each individual at each moment in time and according to the allocated rating, is an ordered probit on panel data. The results obtained indicate that there is a high degree of time correlation in country credit ratings and, furthermore, that the probability of their insolvency is also influenced by random effects of heterogeneity.

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File URL: http://www.usc.es/economet/reviews/aeid514.pdf
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Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 5 (2005)
Issue (Month): 1 ()
Pages:

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Handle: RePEc:eaa:aeinde:v:1:y:2005:i:1_4
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  1. Joachim Inkmann, 1999. "Misspecified heteroskedasticity in the panel probit model: A small sample comparison of GMM and SML estimators," CoFE Discussion Paper 99-04, Center of Finance and Econometrics, University of Konstanz.
  2. John Geweke & Michael Keane & David Runkle, 1994. "Alternative computational approaches to inference in the multinomial probit model," Staff Report 170, Federal Reserve Bank of Minneapolis.
  3. Andrew Berg & Rebecca N. Coke, 2004. "Autocorrelation-Corrected Standard Errors in Panel Probits: An Application to Currency Crisis Prediction," IMF Working Papers 04/39, International Monetary Fund.
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