Bandiera, LucaCuaresma, Jesus CrespoVincelette, Gallina A.2012-03-192012-03-192010-08-01https://hdl.handle.net/10986/3885This paper uses model averaging techniques to identify robust predictors of sovereign default episodes on a pooled database for 46 emerging economies over the period 1980-2004. Sovereign default episodes are defined according to Standard & Poor s or by non-concessional International Monetary Fund loans in excess of 100 percent of the country s quota. The authors find that, in addition to the level of indebtedness, the quality of policies and institutions is the best predictor of default episodes in emerging market countries with relatively low levels of external debt. For emerging market countries with a higher level of debt, macroeconomic stability plays a robust role in explaining differences in default probabilities. The paper provides evidence that model averaging can improve out-of-sample prediction of sovereign defaults, and draws policy conclusions for the current crisis based on the results.CC BY 3.0 IGOAVERAGINGBENCHMARKBONDBUFFERCAPITAL CONTROLCHECKSCHOICECONTROL VARIABLESCORRUPTIONCURRENCYCURRENCY CRISESCURRENT ACCOUNTCURRENT ACCOUNT DEFICITCURRENT ACCOUNT DEFICITSDEBTDEBT ACCUMULATIONDEBT BURDENDEBT CRISESDEBT CRISISDEBT DEFAULTDEBT DEFAULTSDEBT INTOLERANCEDEBT LEVELDEBT LEVELSDEBT MANAGEMENTDEBT MANAGERSDEBT MARKETSDEBT PORTFOLIODEBT RATIOSDEBT SERVICEDEBT SERVICE PROBLEMSDEBT SERVICE TO EXPORTDEBT SERVICINGDEBT SUSTAINABILITYDEFAULT PROBABILITIESDEFAULT PROBABILITYDEFAULT RISKDEFAULT RISKSDEFICITDEPENDENTDEPENDENT VARIABLEDEPRECIATIONDESCRIPTIVE STATISTICSDEVELOPING COUNTRIESDEVELOPING COUNTRYDISTORTIONECONOMETRIC ANALYSISECONOMETRIC MODELSECONOMETRICSECONOMIC CRISISECONOMIC OUTLOOKECONOMIC POLICYECONOMYEMERGING ECONOMIESEMERGING MARKETEMERGING MARKET COUNTRIESEMERGING MARKETSEXCHANGEEXCHANGE CONTROLEXISTING DEBTEXPECTED VALUEEXPLANATORY VARIABLEEXPLANATORY VARIABLESEXPORT GROWTHEXPORT RATIOEXPORTSEXPOSUREEXTERNAL DEBTEXTERNAL DEBT SERVICEEXTERNAL DEMANDEXTERNAL SHOCKSFINANCIAL CRISISFINANCIAL OPENNESSFINANCIAL STABILITYFISCAL BALANCEFISCAL BALANCESFISCAL POLICYFISCAL POSITIONFORECASTSFOREIGN DEBTFOREIGN EXCHANGEFOREIGN EXCHANGE CONTROLFOREIGN EXCHANGE RESERVESFOREIGN FINANCINGFUTUREFUTURE DEBTGDPGDP PER CAPITAGLOBAL DEVELOPMENT FINANCEGOODGROWTH RATEHIGH DEBTHIGHLY INDEBTED COUNTRIESINDEBTEDINDEBTED COUNTRIESINDEBTEDNESSINFLATIONINFLATION RATEINFLATION RATESINSTITUTIONAL ENVIRONMENTINSTITUTIONAL FRAMEWORKINSTRUMENTSINTEREST PAYMENTINTEREST RATE PAYMENTSINTEREST RATESINTERNATIONAL BANKINTERNATIONAL FINANCIAL STATISTICSLEVEL OF DEBTLEVEL OF INDEBTEDNESSLIABILITIESLIQUIDITYLOANLOANSLONG TERM DEBTLOW DEBTLOWER DEBTMACROECONOMIC ENVIRONMENTMACROECONOMIC STABILITYMACROECONOMIC VARIABLESMACROECONOMICSMARGINAL COSTSMATURITIESMATURITYMATURITY STRUCTUREMIDDLE INCOME COUNTRIESMONETARY FUNDMONETARY POLICYMONEYOVERVALUATIONPENALTIESPORTFOLIOPOVERTYPOVERTY REDUCTIONPROBABILITY OF DEFAULTPROPERTIESPUBLIC DEBTQUOTAREAL EXCHANGE RATEREAL EXCHANGE RATE MISALIGNMENTREAL GDPREAL INTERESTREAL INTEREST RATEREPAYMENTRESERVERESERVESREVENUESRISK OF DEFAULTROBUSTNESS CHECKSRULE OF LAWSHARESHORT TERM DEBTSHORT TERM DEBT MARKETSSLOWDOWNSOLVENCYSOVEREIGN DEBTSOVEREIGN DEBT CRISESSOVEREIGN DEFAULTSOVEREIGN DEFAULTSSTANDARD DEVIATIONSTOCKSTOCK OF DEBTSURPLUSSURPLUSESTOTAL DEBTTOTAL EXTERNAL DEBTTRADEUNCERTAINTYVALUEVALUE OF DEBTWEIGHTWEIGHTSWorld Bank10.1596/1813-9450-5401