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Sovereign Debt Defaults: Evidence using Extreme bounds Analysis

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  • Zeaiter, Hussein Zeaiter

    (Lebanese American University)

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.

Suggested Citation

  • Zeaiter, Hussein Zeaiter, 2013. "Sovereign Debt Defaults: Evidence using Extreme bounds Analysis," Working Papers 32/2013, Universidade Portucalense, Centro de Investigação em Gestão e Economia (CIGE).
    • Handle: RePEc:ris:cigewp:2013_032
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    Cited by:

    1. Christoph A. Schaltegger & Martin Weder, 2015. "Fiscal Adjustments and the Probability of Sovereign Default," Kyklos, Wiley Blackwell, vol. 68(1), pages 81-110, February.

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    More about this item

    Keywords

    sovereign debt; Extreme bounds analysis; panel data;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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