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The Politics Of Debt Crises

Beatrice Weder di Mauro and Caroline Van Rijckeghem (cvanrijckeghem@istanbulanalytics.com)

No 4683, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper shows that politics matter in explaining defaults on external and domestic debt obligations. We explore a large number of political and macroeconomic variables using a nonparametric technique to predict safety from default. The advantage of this technique is that it is able to identify complementarities that are not captured in standard probit analysis. We find that political factors matter, and do so in different ways for democratic and non-democratic regimes, and for domestic and external debt. Moreover we find that there is an important complementarity between political and economic conditions, which is essential in explaining the incidence of default.

Keywords: Sovereign debt crises; Political institutions; Early warning systems (search for similar items in EconPapers)
JEL-codes: F30 F34 (search for similar items in EconPapers)
Date: 2004-10
New Economics Papers: this item is included in nep-afr and nep-dcm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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