Predicting Sovereign Debt Crises

By A. Schimmelpfennig, Nouriel Roubini, P. Manasse. Social Science Research Network, 2003

348 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/11c0a88e87155492c5a3ae5ff22ae0f7ba9bb0a9

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In Economics and Econometrics

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Citations in the corpus

Could Early Warning Systems Have Helped To Predict the Sub-Prime Crisis? (2008, background): “…explanation can be found in Breimen et al. (1984) and Steinberg and Colla (1995) and economic applications can be found in Duttagupta and Cashin (2008) who examined banking crises, Manasse et al. (2003) who examined sovereign debt crises and Ghosh and Ghosh (2002) who examined currency crises.”
The Global Financial Crisis and currency crises in Latin America (2012, background): “This is preferable if an event has a very low frequency, as is the case with financial crises (Manasse et al., 2003).”