An Econometric Analysis of the Impact of Sovereign Debt Structure on Default Likelihood

XI Capital Markets Conference, 21-22 December 2012, Indian Institute of Capital Markets (UTIICM)

15 Pages Posted: 1 May 2013

See all articles by Nandita

Nandita

Management Development Institute

Pratap Biswal

Management Development Institute (MDI)

Sajal Ghosh

Management Development Institute

Date Written: December 21, 2012

Abstract

This paper tests the effect of sovereign debt structure on default likelihood. Sovereign debt structure is identified on the basis of maturity, creditor type and currency composition. The paper uses panel logit model to estimate the likelihood of default. The results provide evidence that bilateral loans, short term debt, and bank loans increase the likelihood of default. Results also show that foreign currency denominated debt reduces default likelihood. The study provides empirical evidence to the literature on seniority status of official loans over private debt, and multilateral loans over bilateral loans. The paper models the impact of debt structure directly on the likelihood of default by adopting a comprehensive framework of the debt structure. The paper suggests that debt structure can also identify default episodes and can be used in designing default prediction models.

Keywords: Sovereign debt, default risk, debt structure, debt maturity, creditor type, currency composition, panel logit

JEL Classification: F33, F34, H63, O19

Suggested Citation

, Nandita and Biswal, Pratap and Ghosh, Sajal, An Econometric Analysis of the Impact of Sovereign Debt Structure on Default Likelihood (December 21, 2012). XI Capital Markets Conference, 21-22 December 2012, Indian Institute of Capital Markets (UTIICM) . Available at SSRN: https://ssrn.com/abstract=2258336 or http://dx.doi.org/10.2139/ssrn.2258336

Nandita

Management Development Institute ( email )

Mehrauli Road
Sukhrali
Gurgaon, Haryana 122001
India

Pratap Biswal (Contact Author)

Management Development Institute (MDI) ( email )

Mehrauli Road
Sukhrali
Gurgaon, Haryana 122001
India

Sajal Ghosh

Management Development Institute ( email )

Faculty Block, B3
P.O. Box 60, Sukhrali, Mehrauli Gurgaon Road
Gurgaon, Haryana 122001
India

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