Analyzing Country Risk: Estimating the Probability of External Debt Repudiation in the Post-Oil-Embargo Decade

Author

Thomas Joseph Webster, Graduate Center, City University of New YorkFollow

Date of Degree

1985

Document Type

Dissertation

Degree Name

Ph.D.

Program

Economics

Advisor

Michael Edelstein

Committee Members

Michael Grossman

Salih Neftci

Subject Categories

Economics

Abstract

This dissertation examines the use of logit analysis as a tool for assessing the likelihood that a sovereign risk cannot, or will not, adhere to the terms of its foreign debt obligations as a result of adverse political, social, economic, or financial disruptions. The discussion is divided into two parts. Part one is devoted to a review of the topic of assessing the likelihood of debt servicing difficulties by borrower nations by first tracing the growth of international bank lending activities by U.S. commercial banks, followed by a general discussion of the international debt crisis and a brief survey of some of the conventional approaches employed by many international institutions to assess overseas lending risk. Part one continues with a survey of a variety of social, economic, and political considerations incorporated into the risk evaluation process and concludes with a discussion of how these factors are integrated into the microeconomics of international bank lending.

Part two of this study discusses specifically the use of logit analysis as a tool for evaluating country risk under alternative sub-set data specifications. It begins with a review of the major empirical studies on the use of econometric techniques for predicting the incidence of foreign debt repudiations followed by an investigation of the rescheduling process subsequent to the first oil price "shock" in 1973-74. The analysis attempts to improve and expand upon the work of others by specifically addressing a variety of empirical and theoretical deficiencies present in earlier studies. The paper concludes with a discussion of the possible presence of dynamic elements in the rescheduling process which may ultimately help to improve upon the predictive performance of the logit model.

Comments

Digital reproduction from the UMI microform.

Recommended Citation

Webster, Thomas Joseph, "Analyzing Country Risk: Estimating the Probability of External Debt Repudiation in the Post-Oil-Embargo Decade" (1985). CUNY Academic Works.
https://academicworks.cuny.edu/gc_etds/1756