Predicting Sovereign Debt Crises

We develop an early-warning model of sovereign debt crises. A country is defined to be in a debt crisis if it is classified as being in default by Standard & Poor's, or if it has access to nonconcessional IMF financing in excess of 100 percent of quota. By means of logit and binary recursive tree analysis, we identify macroeconomic variables reflecting solvency and liquidity factors that predict a debt-crisis episode one year in advance. The logit model predicts 74 percent of all crises entries while sending few false alarms, and the recursive tree 89 percent while sending more false alarms.
Publication date: November 2003
ISBN: 9781451875256
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Topics covered in this book

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Finance , Finance , International - Economics , International - Economics , Early-warning system , sovereign debt crises , sovereign default , debt crisis , external debt , debt crises , short-term debt , currency crisis , General Outlook and Conditions , Forecasting and Other Model Applications , Early warning system

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