On the political determinants of sovereign risk: Evidence from a Markov-switching vector autoregressive model for Argentina

Pedro Sottile

Emerging Markets Review, 2013, vol. 15, issue C, 160-185

Abstract: While empirical sovereign credit risk models have portrayed default as driven mainly by economic and financial risk factors, this investigation addresses the relative importance of political risk that the empirical literature has often overlooked. A Markov-switching vector autoregressive model is applied to data from the Republic of Argentina to assess the timing and thresholds of the dynamic system. Results show the significance of political factors in explaining sovereign risk for Argentina, and demonstrate the feasibility and value of the proposed methodology.

Keywords: Republic of Argentina; Markov-switching model; Regime shifts; Vector autoregressive; Political risk; Sovereign risk (search for similar items in EconPapers)
JEL-codes: C32 F34 F37 G01 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:15:y:2013:i:c:p:160-185

DOI: 10.1016/j.ememar.2013.02.005

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