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Predicting Sovereign Debt CrisesPaolo ManasseUniversità degli Studi di Bologna - Department of Economics; IGIER, Bocconi University; International Monetary Fund (IMF) - Fiscal Affairs Department Nouriel RoubiniNew York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER) Axel SchimmelpfennigInternational Monetary Fund (IMF) November 2003 IMF Working Paper No. 03/221 Abstract: 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.
Number of Pages in PDF File: 41 Keywords: Early-warning system, sovereign debt crises, sovereign default JEL Classification: H63, E66, C53 working papers seriesDate posted: February 14, 2006Suggested CitationContact Information
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