Sovereign Debt Crises in Latin America: A Market Pressure Approach

Tjeerd M. Boonman*, Jan P. A. M. Jacobs, Gerard H. Kuper

*Corresponding author for this work

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Abstract

We construct a continuous sovereign debt crisis index for four large Latin American countries for the period 1870-2012. To obtain the optimal set of indicators and the optimal value of the threshold for dating crises we apply the receiver operating characteristic (ROC) curve. Our sovereign debt crisis index is a weighted average of three indicators: the debt-to-GDP ratio, the external interest rate spread, and the exports-to-imports ratio. The continuous index allows a more advanced analysis of sovereign debt crises as illustrated with an investigation of the relationship between sovereign debt crises and business cycles in Latin America.

Original languageEnglish
Pages (from-to)S80-S93
Number of pages14
JournalEmerging Markets Finance and Trade
Volume51
Issue numbersupplement 6
DOIs
Publication statusPublished - 2015

Keywords

  • debt crisis index
  • receiver operating characteristic (ROC) curve
  • sovereign debt crises
  • DEFAULT

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