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"Rules of thumb" for sovereign debt crises

Paolo Manasse () and Nouriel Roubini

Journal of International Economics, 2009, vol. 78, issue 2, 192-205

Abstract: This paper investigates the economic and political conditions that are associated to the occurrence of a sovereign debt crisis. We use a new statistical approach (Classification and Regression 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: Sovereign; debt; Crises; Default (search for similar items in EconPapers)
Date: 2009
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Working Paper: “Rules of Thumb” for Sovereign Debt Crises (2005) Downloads
Working Paper: 'Rules of Thumb' for Sovereign Debt Crises (2005) Downloads
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