Determinants of sovereign-debt default in developing countries.

摘要

In the nineteenth and the early twentieth century, sovereign debt was a destabilizing factor in the international financial market. Likewise, the contemporary sovereign debt crisis has affected the world economy critically. During the last three decades, many countries have defaulted on their sovereign debt, which has had the effect of worsening international financial crises. These debt crises seriously hurt the international financial system and dampened the world economy, mainly affecting the least developed countries. Hundreds of commercial banks and dozens of sovereign states loaned or borrowed several hundred billion dollars of sovereign debts. These events drew the attention of numerous researchers because of the voluminous debts and the world's inexperience in coping with such global crises. The main purpose of this study is to find the reasons behind countries' inability to service their external debt and the factors that are the main influence on developing countries' default on sovereign debt. A continuous measure of the ratio of accumulated debt arrears to external debt is used as a dependent variable to address this issue. Based on a sample of 136 countries, spanning more than three decades (1970-2003), the dissertation finds the following: first, a continuous measure of the default risk better represents the default risk than the discrete measures that have been used in previous studies. Second, political instability has significant effects on default risk for HIPCs and low income countries. Third, a subsample of the highly indebted, least developed countries (HIPCs) shows that several explanatory variables have a significant effect on the sovereign default.