Revisiting the Effects of Country Specific Fundamentals on Sovereign Default Risk

Economics Bulletin, Vol. 32 No. 4, pp. 3008-3016, 2012

9 Pages Posted: 21 Nov 2012

See all articles by Manuel Ramos-Francia

Manuel Ramos-Francia

Banco de México

Jose Gonzalo Rangel

Goldman Sachs Group, Inc. - Global Investment Research

Date Written: May 4, 2011

Abstract

This paper re-examines the role of country-specific fundamentals in explaining sovereign risk. Our analysis focuses on 26 countries, including both developed and emerging economies, during a recent sample period. For both groups, while inflation and twin deficits are associated with higher sovereign spreads, real growth shows negative effects on default risk. International reserves and exchange rate appreciations are associated with lower default risk in emerging markets.

Keywords: sovereign risk, macroeconomic fundamentals, emerging, developed

JEL Classification: F32, F34, E44, E60

Suggested Citation

Ramos-Francia, Manuel and Rangel, Jose Gonzalo, Revisiting the Effects of Country Specific Fundamentals on Sovereign Default Risk (May 4, 2011). Economics Bulletin, Vol. 32 No. 4, pp. 3008-3016, 2012. Available at SSRN: https://ssrn.com/abstract=2178794

Manuel Ramos-Francia

Banco de México

Jose Gonzalo Rangel (Contact Author)

Goldman Sachs Group, Inc. - Global Investment Research ( email )

200 West Street
New York, NY 10280
United States

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