Postprint version. Published in Country Risk Analysis: A Handbook, January 1, 1992, pages 100-117.
Copyright © 1992 Taylor & Francis. This is an electronic version of an article published in Country Risk Analysis: A Handbook. The definitive version is available at http://www.taylorandfrancis.com/books/details/9780203203101/.
NOTE: At the time of publication, the author Eric Fisher was not yet affiliated with Cal Poly.
The purpose of this chapter is to review the literature on empirical models of debt-rescheduling in international financial markets. The discussion focuses primarily on the statistical techniques that have been developed. These fall into two areas: discriminant-analysis and probabilistic-choice models. We also present other methods that might prove useful in future empirical research in this area. In particular, we discuss debt-rescheduling from the point of view of an explicitly dynamic economic analysis.
This chapter is divided into three sections. In the first section, we review the applied literature on international debt-rescheduling. We focus primarily on empirical studies and give only cursory discussion of the theoretical models of debt with sovereign risk. We also describe the common characteristics of the data that are used in these studies and give some of their sources. In the second section, we present summaries of the statistical techniques that have been used to determine the creditworthiness of the debtor countries. In the third section, we present a method of estimating debt-reschedulings as a dynamic program where the relevant control variable is a debtor country's decision to reschedule or not. This framework employs a forward-looking technique that has not yet been implemented in this literature.