Predicting Sovereign Debt Crises

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Predicting Sovereign Debt Crises

Authors : Mr. Axel Schimmelpfennig, Nouriel Roubini, Paolo Manasse
Publisher : International Monetary Fund
Published Date : 2003-11-01
ISBN-13 : 9781452711690
Page : 41 Pages
Language : en

Descriptions 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.

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