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Title: The Politics Of Debt Crises

Author(s): Caroline Van Rijckeghem and Beatrice Weder di Mauro

Publication Date: October 2004

Keyword(s): early warning systems, political institutions and sovereign debt crises

Programme Area(s): International Macroeconomics

Abstract: This paper shows that politics matter in explaining defaults on external and domestic debt obligations. We explore a large number of political and macroeconomic variables using a nonparametric technique to predict safety from default. The advantage of this technique is that it is able to identify complementarities that are not captured in standard probit analysis. We find that political factors matter, and do so in different ways for democratic and non-democratic regimes, and for domestic and external debt. Moreover we find that there is an important complementarity between political and economic conditions, which is essential in explaining the incidence of default.

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Bibliographic Reference

Van Rijckeghem, C and Weder di Mauro, B. 2004. 'The Politics Of Debt Crises'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4683