Sovereign Risk and Simple Debt Dynamics: The Case of Brazil and Argentina
In this paper we develop a simple neoclassical growth model with perfect internationalcapital mobility to analyze the international debt dynamics of developing countries ingeneral and Brazil and Argentina in particular. We show that three different regimes canbe distinguished: a stable steady state debtor regime, a stable steady state creditor regimeand an unstable regime. A switch from a stable debtor or a stable creditor position to anunstable creditor regime may be a sign of forthcoming trouble. We investigate this issueempirically for Brazil and Argentina over the period 1960-1999. Over the full sample, theevidence suggests that debt dynamics evolved according to the stable debtor case in bothcountries. Using a rolling regression technique, we find that indeed occasional switchesto the unstable regime occurred. In particular, Argentina was in the unstable regime formost of the 1990s way before the Argentine debt crisis erupted.
|Date of creation:||2002|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 616, 6200 MD Maastricht|
Phone: (31) (0)43 3883875
Fax: (31) (0)43 3216518
Web page: http://www.maastrichtuniversity.nl/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Perron, Pierre & Vogelsang, Timothy J, 1992.
"Nonstationarity and Level Shifts with an Application to Purchasing Power Parity,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 10(3), pages 301-20, July.
- Vogelsang, T.I. & Perron, P., 1991. "Nonstationary and Level Shifts With An Application To Purchasing Power Parity," Papers 359, Princeton, Department of Economics - Econometric Research Program.
- Hori, Hajime & Stein, Jerome L, 1977. "International Growth with Free Trade in Equities and Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(1), pages 83-100, February.
- Neher, Philip A, 1970. "International Capital Movements along Balanced Growth Paths," The Economic Record, The Economic Society of Australia, vol. 46(115), pages 393-401, September.
- Fischer, Stanley & Frenkel, Jacob A, 1974. "Interest Rate Equalization and Patterns of Production, Trade and Consumption in a Two-country Growth Model," The Economic Record, The Economic Society of Australia, vol. 50(132), pages 555-80, December.
- Perron, P. & Bai, J., 1995.
"Estimating and Testing Linear Models with Multiple Structural Changes,"
Cahiers de recherche
9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
- Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
- Oetzel, Jennifer M. & Bettis, Richard A. & Zenner, Marc, 2001. "Country risk measures: how risky are they?," Journal of World Business, Elsevier, vol. 36(2), pages 128-145, July.
- Onitsuka, Yusuke, 1974. "International Capital Movements and the Patterns of Economic Growth," American Economic Review, American Economic Association, vol. 64(1), pages 24-36, March.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
- Kenneth Rogoff & Charles Wyplosz, 1996. "International Seminar on Macroeconomics," NBER Books, National Bureau of Economic Research, Inc, number rogo96-1, Jan-Jun.
When requesting a correction, please mention this item's handle: RePEc:unm:umamer:2002034. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Charles Bollen)
If references are entirely missing, you can add them using this form.