Financial crises and the extreme bounds of predictors

Scottish J Political Eco

2018

Over a long horizon, this paper examines joint economic crises and determines the power of 49 variables in predicting such episodes. While incorporating dynamism in the prediction, we generate the predictive power of various specifications and model the uncertainty in the parameters of interest. The results reveal that growth of real gross domestic product per capita, regulation, bank non-performing loans, interest rate and inflation rate are the most significant variables in predicting the joint economic crises. These variables predict economic crises with about 93% accuracy and can predict joint economic crises in developing countries and recent joint crises.

Section: Introductionsupporting

confidence: 56%

The exploration of economic crises: parameter uncertainty and predictive ability

Scottish J Political Eco

2018

“…We control for the level of external debt relative to gross national income (GNI), trade openness, inflation and current account balance (see, e.g. Inekwe, 2019aInekwe, , 2018.…”

Section: Methodsmentioning

confidence: 99%

“…There is less consensus, however, concerning the signs and the relative importance of these variables in explaining the episodes of default. With the rise in the likelihood of defaults on sovereign debts, the body of research examining the potential determinants of default on sovereign borrowing and its associated costs continue to grow (see, Müller, Storesletten and Zilibotti, 2016; Reinhart and Trebesch, 2016; Inekwe, 2018, 2019a).…”

Section: Overview Of the Literaturementioning

confidence: 99%

See 1 more Smart Citation

Convergence in Sovereign Debt Defaults: Quantifying the Roles of Institutions

Bhattacharya

2021

Oxf Bull Econ Stat

Self Cite

In this study, using an ex ante measure, we examine the convergence patterns in sovereign defaults among 101 developing countries for the period from 1990 to 2015. We employ the club convergence algorithm to determine convergence paths across countries and examine the role of institutions in shaping the observed convergence patterns. The merging of clubs reveals three distinct convergent sub‐clubs. Countries in each of these sub‐clubs tend to exhibit a similar pattern of long‐run convergence in cases of sovereign debt default. Countries with better institutions are less likely to belong to a club with greater risks of sovereign defaults by 7% points. Unlike trade openness, levels of external debt, inflation and current account balance increase the probability of default in these economies.

“…Inekwe (2018a) andInekwe (2018b) find that regulation is an indispensable factor for the control of episodes of financial crises.…”

mentioning

confidence: 99%

Financial integration and banking crisis. A critical analysis of restrictions on capital flows

Valenzuela²

2019

World Economy

We investigate the effect of financial integration on a banking crisis. In contrast to existing works, we allow for capital restrictions while studying the impact of financial integration on a banking crisis. Using firm‐level lending and borrowing information in the global market of syndicated loans; we generate aggregate measures of financial integration and examine how countries with capital flow restrictions thrive in the wake of a banking crisis. We concentrate on basic network measures of integration for a panel of 62 countries that allow for capital restriction at any time within the sample period. Financial integration increases the incidence of a banking crisis, and capital restrictions worsen a banking crisis. However, capital restrictions reduce the negative impact of financial integration on the incidence of a banking crisis. Thus, financial integration becomes beneficial when countries allow for some forms of capital control.