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Predicting Sovereign Debt Crises

Author

Listed:
  • Mr. Axel Schimmelpfennig
  • Nouriel Roubini
  • Paolo Manasse

Abstract

We develop an early-warning model of sovereign debt crises. A country is defined to be in a debt crisis if it is classified as being in default by Standard & Poor's, or if it has access to nonconcessional IMF financing in excess of 100 percent of quota. By means of logit and binary recursive tree analysis, we identify macroeconomic variables reflecting solvency and liquidity factors that predict a debt-crisis episode one year in advance. The logit model predicts 74 percent of all crises entries while sending few false alarms, and the recursive tree 89 percent while sending more false alarms.

Suggested Citation

  • Mr. Axel Schimmelpfennig & Nouriel Roubini & Paolo Manasse, 2003. "Predicting Sovereign Debt Crises," IMF Working Papers 2003/221, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2003/221
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    References listed on IDEAS

    as
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