Unpleasant Surprises : Sovereign Default Determinants and Prospects
This paper uses model averaging techniques to identify robust predictors of sovereign default episodes on a pooled database for 46 emerging economies over the period 1980-2004. Sovereign default episodes are defined according to Standard & Poor...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100816162137 http://hdl.handle.net/10986/3885 |
| Summary: | This paper uses model averaging
techniques to identify robust predictors of sovereign
default episodes on a pooled database for 46 emerging
economies over the period 1980-2004. Sovereign default
episodes are defined according to Standard & Poor s or
by non-concessional International Monetary Fund loans in
excess of 100 percent of the country s quota. The authors
find that, in addition to the level of indebtedness, the
quality of policies and institutions is the best predictor
of default episodes in emerging market countries with
relatively low levels of external debt. For emerging market
countries with a higher level of debt, macroeconomic
stability plays a robust role in explaining differences in
default probabilities. The paper provides evidence that
model averaging can improve out-of-sample prediction of
sovereign defaults, and draws policy conclusions for the
current crisis based on the results. |
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