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Predicting Sovereign Debt Crises

Author/Editor: Manasse, Paolo | Roubini, Nouriel | Schimmelpfennig, Axel
Authorized for Distribution: November 1, 2003
Electronic Access: Free Full Text (PDF file size is 644KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: 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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Series: Working Paper No. 03/221
Subject(s): Debt | Financial crisis | Liquidity
Author's keyword(s): Early warning system | sovereign debt crises | sovereign default
 
English  
    Published:   November 1, 2003        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2212003   Pages:   40
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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