Sovereign Risk Analysis Using Self-Organizing Maps: The European, Spanish and German Case

39 Pages Posted: 19 Aug 2012

See all articles by Félix J. López-Iturriaga

Félix J. López-Iturriaga

University of Valladolid - Department of Financial Economics and Accounting; National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy

Iván Pastor-Sanz

University of Burgos

Date Written: August 19, 2012

Abstract

The economic recession in the European countries during the current financial crisis and the worsening of the financial situation in a number of countries have resulted in an increase of the sovereign debt risk. In this paper we use the method of self-organizing maps to propose a European classification according to the sovereign risk of each country. We detect different risk profiles across countries and identify the public expenditure and the saving rate as the most critical variables to assess the sovereign risk. In addition, since several countries of the European Union have regions with some degree of economic and financial competences, we study the influence of the regions on the country sovereign risk. We classify and compare the Spanish and German regions and we prove the impact of the regional situation on the whole country situation.

Keywords: neural networks, sovereign risk

JEL Classification: C45, H63

Suggested Citation

Lopez-Iturriaga, Felix Javier and Pastor-Sanz, Iván, Sovereign Risk Analysis Using Self-Organizing Maps: The European, Spanish and German Case (August 19, 2012). Available at SSRN: https://ssrn.com/abstract=2131971 or http://dx.doi.org/10.2139/ssrn.2131971

Felix Javier Lopez-Iturriaga (Contact Author)

University of Valladolid - Department of Financial Economics and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain
+34 983 184 395 (Phone)
+34 983 183830 (Fax)

HOME PAGE: http://www2.eco.uva.es/flopez

National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy ( email )

Lebedeva,27
Perm, Perm 614070
Russia

Iván Pastor-Sanz

University of Burgos ( email )

Hospital del Rey, s/n
Burgos, 09001
Spain

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