Sovereign Debt Defaults and Financing Needs

Author/Editor:

Miguel Messmacher ; Mark Kruger

Publication Date:

March 1, 2004

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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 construct a financial vulnerability indicator that is consistent with the theoretical literature on determinants of defaults. It is based on the amount of new foreign financing that is needed to avoid a default or an import adjustment, expressed as a proportion of the country's sources of foreign currency. As the need for new foreign financing increases, so does a country's financial vulnerability. The indicator has a higher correlation with default episodes than other indicators used in previous studies. In addition, the level at which it leads to a high probability of default is comparable across countries.

Series:

Working Paper No. 04/53

Subject:

English

Publication Date:

March 1, 2004

ISBN/ISSN:

9781451847413/1018-5941

Stock No:

WPIEA0532004

Format:

Paper

Pages:

33

Please address any questions about this title to publications@imf.org