The Politics of Debt Crises

44 Pages Posted: 16 Dec 2004

See all articles by Caroline Van Rijckeghem

Caroline Van Rijckeghem

Istanbul Analytics

Beatrice Weder di Mauro

Graduate Institute Geneva, IHEID; Graduate Institute Geneva, IHEID

Date Written: October 2004

Abstract

This paper shows that politics matter in explaining defaults on external and domestic debt obligations. We explore a large number of political and macroeconomic variables using a nonparametric technique to predict safety from default. The advantage of this technique is that it is able to identify complementarities that are not captured in standard probit analysis. We find that political factors matter, and do so in different ways for democratic and non-democratic regimes, and for domestic and external debt. Moreover, we find that there is an important complementarity between political and economic conditions, which is essential in explaining the incidence of default.

Keywords: Sovereign debt crises, political institutions, early warning systems

JEL Classification: D27, F30, F34

Suggested Citation

Van Rijckeghem, Caroline and Weder di Mauro, Beatrice and Weder di Mauro, Beatrice, The Politics of Debt Crises (October 2004). Available at SSRN: https://ssrn.com/abstract=636043

Caroline Van Rijckeghem (Contact Author)

Istanbul Analytics ( email )

Istanbul
Turkey

Beatrice Weder di Mauro

Graduate Institute Geneva, IHEID ( email )

Geneva Avenue de la Paix 11A
Geneva, 1202
Switzerland
1211 (Fax)

Graduate Institute Geneva, IHEID ( email )

Chemin Eugene Rigot 2
Geneva, 1211
Switzerland

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