Sovereign Debt Crises in Latin America: A Market Pressure Approach

Tjeerd Boonman, Jan Jacobs and Gerard Kuper

Emerging Markets Finance and Trade, 2015, vol. 51, issue S6, S80-S93

Abstract: We construct a continuous sovereign debt crisis index for four large Latin American countries for the period 1870−2012. To obtain the optimal set of indicators and the optimal value of the threshold for dating crises we apply the receiver operating characteristic (ROC) curve. Our sovereign debt crisis index is a weighted average of three indicators: the debt-to-GDP ratio, the external interest rate spread, and the exports-to-imports ratio. The continuous index allows a more advanced analysis of sovereign debt crises as illustrated with an investigation of the relationship between sovereign debt crises and business cycles in Latin America.

Date: 2015
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DOI: 10.1080/1540496X.2015.1080558

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