In this paper, we use a transition model to study the determinants of the amount of debt defaulted by the emerging countries, going a step further than the usual estimation of a probability of sovereign default. The empirical framework is a panel smooth transition model that allows to capture the heterogeneous effects, across time and countries, from threshold variables defining different regimes of vulnerability to sovereign default. We highlight four variables able to discriminate country-year observations into different vulnerability levels, and find that countries located in the same geographical area do not necessarily present the same vulnerability profile.
Amundi Working Paper - April 2015
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