“Rules of Thumb” for Sovereign Debt Crises

Nouriel Roubini and Paolo Manasse

No 2005/042, IMF Working Papers from International Monetary Fund

Abstract: This paper contains an empirical investigation of the set of economic and political conditions that are associated with a likely occurrence of a sovereign debt crisis. We use a new statistical approach (Binary Recursive 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: WP; debt crisis; crisis episode; crisis probability; debt path; risk type (search for similar items in EconPapers)
Pages: 32
Date: 2005-03-01
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Citations: View citations in EconPapers (43)

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Related works:
Journal Article: "Rules of thumb" for sovereign debt crises (2009)
Working Paper: 'Rules of Thumb' for Sovereign Debt Crises (2005)
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