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The Macroeconomic Imbalance Procedure: A useful tool for predicting sovereign crises?

Alfredo Arahuetes () and Gonzalo Gómez Bengoechea ()

Estudios de Economia, 2018, vol. 45, issue 1 Year 2018, 79-111

Abstract: This paper provides an empirical analysis of the Macroeconomic Imbalance Procedure (MIP). It explores the relationship between sovereign bond yields spreads and the variables contained in the MIP scoreboard using quantile regressions. Results suggest that MIP indicators can explain the behavior of sovereign spreads two, three and four quarters in advance. The scoreboard can’t capture strong non-variant country effects that affect the evolution of spreads as well as the different impact that each indicator has on different countries. The introduction of employment indicators has reduced the aggregate effect that country effects have on sovereign spreads.

Keywords: Sovereign spreads; quantile regressions; Macroeconomic Imbalance Procedure (search for similar items in EconPapers)
JEL-codes: H63 G15 C31 N2 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:udc:esteco:v:45:y:2018:i:1:p:79-111