Debt Crisis Determinants: Early Warning Indicators for Emerging Markets.
Abstract: Using a panel of 37 emerging market countries for the period
1990-2010, this paper employs a variety of econometric techniques to assess the role of
political risk, macroeconomic fundamentals, and financial development in how it may predict
the occurrence of a debt crisis. To identify early warning determinants, the paper uses a
conventional Logit and a Parametric Proportional Hazard... read mores regression along with Bayesian
model averaging to account for model uncertainty. Results suggest that crisis is largely
explained by economic variables, which include external debt ratios measuring solvency and
debt sustainability, measures of illiquidity or refinancing risk, measures of external
imbalance and debt-servicing pressures along with controls for GDP. In addition, risks to
the incumbent government from the outside world or internal military, which may affect
investors' confidence, are also significant predictors. Lastly, results highlight that
financial systems with more efficient and healthier commercial banks are better equipped to
channel savings to investors and are thus less likely to enter a debt
Thesis (M.S.)--Tufts University, 2013.
Submitted to the Dept. of Economics.
Advisor: Marcelo Bianconi.
Committee: Edward Kutsoati.
Keywords: Economics, Banking, and Finance.read less