Article1992

Political instability, country risk and probability of default

113 citations0/0 files storedApplied Economics

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Credit Risk and Financial Regulations Global Financial Crisis and Policies Fiscal Policies and Political Economy

Abstract

Two political risk variables (level of demaocracy and political instability) are created and included in a probit model of rescheduling. Both the coefficient estimates and the forecasting performance strongly support the importance of including quantified proxies of political events in the assessment of overall country exposure faced by international lenders. An inverse relationship between rescheduling probabilities for a given country and its level of democracy is found, while a direct relationship is established between the rescheduling probabilities and the level of political instability.

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References

1984LDC Foreign Borrowing and Default Risk: An Empirical Investigation, 1976-80 1983LDC's Foreign Borrowing and Default Risk: An Empirical Investigation 1977A study of debt servicing capacity applying logit analysis 1985International debt and the developing countries 1982Managing Political Risk Assessment 1986International Debt: Systemic Risk and Policy Response.1987Country risk and political instability 1984A survey of the quantitative approaches to country risk analysis

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