A Country Risk Assessment Model and the Asian Crisis
This paper estimates country risk using an alternative method to commonly used country risk models by the rating agencies. The paper builds on earlier work and tries to identify empirically the important factors affecting debt service capacity of borrowing countries. In this study we assess the riskiness of 34 developing countries over the period 1986 to 1998 using a two-limit Tobit model. In the model a-year-ahead debt rescheduling ratios are used as the dependent variable. Using the debt rescheduling ratios, we emphasize the role of relative sizes of debt rescheduling in predicting external debt crisis. The model is tested for its predictability of the external debt crises and the results are compared with the rating of S&P and Moody's. A special emphasis is given to the recent Asian crisis and its predictability.
Volume (Year): 1 (2001)
Issue (Month): 1 ()
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- Feder, Gershon & Just, Richard E., 1976.
"A Study of Debt Servicing Capacity Applying Logit Analysis,"
225630, University of California, Davis, Department of Agricultural and Resource Economics.
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- Hernandez-Trillo, Fausto, 1995. "A model-based estimation of the probability of default in sovereign credit markets," Journal of Development Economics, Elsevier, vol. 46(1), pages 163-179, February.
- Hajivassiliou, Vassilis A., 1987. "The external debt repayments problems of LDC's : An econometric model based on panel data," Journal of Econometrics, Elsevier, vol. 36(1-2), pages 205-230.
- Frank, Charles Jr. & Cline, William R., 1971. "Measurement of debt servicing capacity: An application of discriminant analysis," Journal of International Economics, Elsevier, vol. 1(3), pages 327-344, August.
- Rosett, Richard N & Nelson, Forrest D, 1975. "Estimation of the Two-Limit Probit Regression Model," Econometrica, Econometric Society, vol. 43(1), pages 141-46, January.
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