"Rules of Thumb" for Sovereign Debt Crises

Paolo Manasse () and Nouriel Roubini

No 05/42, IMF Working Papers from International Monetary Fund

Abstract: This paper contains an empirical investigation of the set of economic and political conditions that are associated with a likely occurrence of a sovereign debt crisis. We use a new statistical approach (Binary Recursive Tree) that allows us to derive a collection of "rules of thumb" that help identify the typical characteristics of defaulters. We find that not all crises are equal: they differ depending on whether the government faces insolvency, illiquidity, or various macroeconomic risks. We also characterize the set of fundamentals that can be associated with a relatively "risk free" zone. This classification is important for discussing appropriate policy options to prevent crises and improve response time and prediction.

Keywords: External Debt; Financial crisis; Debt restructuring (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-fmk
Date: 2005-03-11
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Related works:
Working Paper: 'Rules of Thumb' for Sovereign Debt Crises (2005)
Journal Article: "Rules of thumb" for sovereign debt crises (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:imf:imfwpa:05/42

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