A Study of Country-Risk for Non-Developed Countries in 1980-2000

28 Pages Posted: 19 Aug 2008

See all articles by Mariano Gonzalez

Mariano Gonzalez

Universidad San Pablo CEU

Roman Minguez

affiliation not provided to SSRN

Date Written: August 18, 2008

Abstract

This article aims at discovering a coherent method for estimating country risk for non-developed countries, determining the components and most significant factors involved and thus avoiding the "black boxes" represented by external agency ratings. The data used form a panel of 40 non-developed countries, grouped into 5 geographical areas, during the 1985-2000 period (World Bank database, 2002). A credit rating is allocated to the countries concerned based on criteria similar to those applied to business solvency, and we then attempt to explain this rating by other macroeconomic factors obtained from the same database. The model employed to determine the probabilities corresponding to each individual at each moment in time and according to the allocated rating, is an ordered probit on panel data. The results obtained indicate that there is a high degree of time correlation in country credit ratings and, furthermore, that the probability of their insolvency is also influenced by random effects of heterogeneity.

Keywords: Country risk, Panel data, External debt, National saving, Ordered probit, Non-developed countries

JEL Classification: C33, C35, F34, H63, O16

Suggested Citation

Gonzalez, Mariano and Minguez, Roman, A Study of Country-Risk for Non-Developed Countries in 1980-2000 (August 18, 2008). Applied Econometrics and International Development, Vol. 5, No. 1, 2005, Available at SSRN: https://ssrn.com/abstract=1235162

Mariano Gonzalez

Universidad San Pablo CEU ( email )

Julian Romea, 23
Madrid, 28003
Spain

Roman Minguez

affiliation not provided to SSRN

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