The Economic Content of Indicators of Developing Country Creditworthiness

Haque, Nadeem Ul; Kumar, Manmohan S.; Mark, Nelson C.; Mathieson, Donald J.

doi:10.2307/3867366

Cited by 132 publications

(79 citation statements)

References 14 publications

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“…In addition, current account/GDP is very significant although it has the wrong sign. Variables suggested by Edwards (1984) (investment/GDP) and by Haque, Kumar, Mark and Mathieson (1996) (terms of trade and export growth rate) are also significant.…”

Section: External Shocks Variables Of This Kind Include: (I) Changesmentioning

confidence: 87%

“…4 To deduce which variables to include, we draw on several past empirical studies. These studies have examined determinants (i) of sovereign ratings (see Cantor and Packer (1996), Haque, Kumar, Mark and Mathieson (1996), Juttner andMcCarthy (1998), Monfort andMulder (2000)), (ii) of sovereign defaults (see Edwards (1984)), and (iii) of spreads on sovereign debt (see Burton and Inoue (1985), Edwards (1986), Cantor and Packer (1996), Eichengreen and Mody (1998), Min (1998), Kamin and Kleist (1999)). …”

Section: The Data Employedmentioning

confidence: 99%

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The estimation of transition matrices for sovereign credit ratings

Kiesel

Perraudin

2002

Journal of Banking & Finance

128

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Rating transition matrices for sovereigns are an important input to risk management of portfolios of emerging market credit exposures. They are widely used both in credit portfolio management and to calculate future loss distributions for pricing purposes.However, few sovereigns and almost no low credit quality sovereigns have ratings histories longer than a decade, so estimating such matrices is difficult. This paper shows how one may combine information from sovereign defaults observed over a longer period and a broader set of countries to derive estimates of sovereign transition matrices. * Birkbeck College, yhu@econ.bbk.ac.uk ** London School of Economics, r.t.kiesel@lse.ac.uk *** Birkbeck College, Bank of England and CEPR, wperraudin@econ.bbk.ac.ukThe authors thank Paul Radford, John Waterman and other ECGD staff, and an anonymous referee for extremely helpful comments. Views expressed are those of the authors and not necessarily those of the Bank of England.

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Section: External Shocks Variables Of This Kind Include: (I) Changesmentioning

confidence: 87%

Section: The Data Employedmentioning

confidence: 99%

The estimation of transition matrices for sovereign credit ratings

Kiesel

Perraudin

2002

Journal of Banking & Finance

128

View full text Add to dashboard Cite

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“…Others (Euh, 1979, andHaque andothers, 1996) use a creditworthiness index as the dependent variable. 6 Probit and logit models allow the analysis of qualitative or binary dependent variables.…”

Section: Empirical Evidence On the Determinants Of External Debt Rmentioning

confidence: 99%

Countries' Repayment Performance Vis-a-Vis the IMF: An Empirical Analysis

Aylward

Thorne²

1998

Staff Papers - International Monetary Fund

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While the literature on external debt repayment performance by sovereign debtors is extensive, repayment performance vis-à-vis the International Monetary Fund has not been dealt with separately. Given differences between the IMF and other providers of financial resources, this paper considers whether it is possible to distinguish through logit analysis between the countries that make timely repayments to the Fund and those that become overdue. The paper finds that the inclusion of IMF-specific financial variables and a small number of macroeconomic variables yields a highly significant econometric model of the probability of a country incurring IMF arrears. [JEL F33, F34]T HE FAILURE of some member countries to repay obligations on time became a matter for serious concern for the IMF toward the end of the fourth decade of the IMF's history-around the mid-1980s, a few years after the debt crisis began. At that time, the duration and magnitude of countries' arrears to the IMF increased, as did the number of countries involved, in contrast to the rare and brief cases of late payments in earlier years.Total arrears rose from SDR 25 million in the first quarter of 1981 to a peak of SDR 3.7 billion in 1992. Since then, total arrears have declined as a number 595

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“…It is worth noting that in addition to the variables listed in Tables 2 and 3, Haque et al (1996), Cantor and Packer (1996), Larrain et al (1997), Monfort and Mulder (2000), Hu et al (2002), and Remolona et al (2008) use a variable that represents the historical solvency of a country. Haque et al (1996) use the lagged rating at time (t − 1) as an independent variable in their regression model.…”

Section: Variable Selection Criteriamentioning

confidence: 98%

Reverse-engineering country risk ratings: a combinatorial non-recursive model

2009

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The central objective of this paper is to develop a transparent, consistent, selfcontained, and stable country risk rating model, closely approximating the country risk ratings provided by Standard and Poor's (S&P). The model should be non-recursive, i.e., it should not rely on the previous years' S&P ratings. The set of variables selected here includes not only economic-financial but also political variables. We propose a new model based on the novel combinatorial-logical technique of Logical Analysis of Data (which derives a new rating system only from the qualitative information representing pairwise comparisons of country riskiness). We also develop a method allowing to derive a rating system that has any desired level of granularity. The accuracy of the proposed model's predictions, measured by its correlation coefficients with the S&P ratings, and confirmed by kfolding cross-validation, exceeds 95%. The stability of the constructed non-recursive model is shown in three ways: by the correlation of the predictions with those of other agencies (Moody's and The Institutional Investor), by predicting 1999 ratings using the non-recursive model derived from the 1998 dataset applied to the 1999 data, and by successfully predicting the ratings of several previously non-rated countries. This study provides new insights on the importance of variables by supporting the necessity of including in the analysis, in addition to economic variables, also political variables (in particular "political stability"), and Peter L. Hammer tragically died in a car accident on December 27, 2006, after this manuscript was essentially completed. The authors express their appreciation to Dr. Sorin Alexe for his invaluable help in the execution of computational experiments with LAD.

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The Economic Content of Indicators of Developing Country Creditworthiness

Cited by 132 publications

References 14 publications

The estimation of transition matrices for sovereign credit ratings

The estimation of transition matrices for sovereign credit ratings

Countries' Repayment Performance Vis-a-Vis the IMF: An Empirical Analysis

Reverse-engineering country risk ratings: a combinatorial non-recursive model

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