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The Political Economy of Sovereign Default

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Sebastian Hohmann

Annexe

A. Variable descriptions

Texte intégral

1The appendix lists all variables, or component variables in the case of the institutional variables w and s, together with sources. Detailed descriptions, the wording of which is taken, if possible, directly from the original sources, are also given.

Economic variables – dependent

name:external_debt_cris

source: Reinhart, Camen M. and Kenneth S. Rogoff, From Financial Crash to Debt Crisis, NBER Working Paper 15795, March 2010. Forthcoming in American Economic Review

http://terpconnect.umd.edu/~creinhar/Courses.html

description: External debt crisis: Failure by the government to meet a principal or interest payment on the due date (or within the specified grace period) for its external debt obligations. Episodes also include instances rescheduled debt is ultimately extinguished in terms less favourable than the initial obligation.

External debt is defined as debt issued under another country’s jurisdiction, typically (but not always) denominated in foreign currency.

Note: while time of default is accurately classified as a crisis year, there are also a large number of cases where the final resolution with the creditors (if it ever did take place) seems indeterminate. Therefore, R&R also work with a crisis dummy that only picks up the first year.

name:domestic_debt_cris

source: Reinhart, Camen M. and Kenneth S. Rogoff, From Financial Crash to Debt Crisis, NBER Working Paper 15795, March 2010. Forthcoming in American Economic Review

http://terpconnect.umd.edu/~creinhar/Courses.html

description: Domestic debt crisis: Same definition as for external debt crisis applies. In addition, domestic debt crises have also involved the freezing of bank deposits, and or forcible conversions of such deposits from Dollars to local currency.

Domestic debt is defined as debt issued under a country’s own legal jurisdiction.

Note: At best there is partial documentation on recent domestic defaults provided by S&P. Historically, domestic debt crises are difficult to date and for many cases it is impossible to ascertain the date of final resolution.

name:LT_rate

source: International Monetary Fund International Financial Statistics

http://www.imfstatistics.org/imf/

description: Long term interest rates: Yield on long term government bonds. Maturities are mostly 10 years, but yields on 15-year bonds are included as well.

name:EMBI

source: J.P. Morgan Emerging Market Research

http://www.jpmorgan.com/pages/jpmorgan/investbk/solutions/research/EMBI

description: Emerging Market Bond Index (EMBI) Global spreads. The EMBI Global Tracks total returns for U.S. dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities, including Brady bonds, loans and Eurobonds. Only issues with a face value outstanding of 500$ U.S. or more are included. Spreads are over the theoretical zero coupon yield on U.S. treasury securities.

name:LCR

source: for Moody’s: Moody’s Global Credit Research, Sovereign Default and Recovery Rates 1983-2007, March 2008 and Moody’s website. for S&P: Standard & Poor’s RatingsDirect, Sovereign Ratings History Since 1975, January 2007 and S&P website. For Fitch: Fitch Ratings, Complete Sovereign Ratings History, April 2011

general: Cbonds.Info - CIS - Fixed income markets in Russia and CIS

http://v2.moodys.com/​cust/​content/​content.ashx?source=StaticContent/​Free%20Pages/​Credit%20Policy%20Research/​documents/​current/​2007100000482445.pdf

http://www.moodys.com/

http://www2.standardandpoors.com/spf/pdf/fixedincome/KRsovereignSovRatingsHistorySince1975.pdf

http://www.standardandpoors.com/home/en/eu

http://www.fitchratings.com/web_content/ratings/sovereign-ratings_history.xls

http://www.cbonds.info/​cis/​eng/​ratings/​history.phtml

description: Local Currency Rating: Issuer Ratings of sovereign borrower’s securities issued in local currency based on the ratings of the agencies Moody’s, Standard and Poor’s and Fitch. The agency letter ratings were first converted into numerical values using the metric in Table 1, also used in: Robert Gaillard, Fitch, Moody’s and S&P’s Sovereign Ratings and EMBI Global Spreads: Lessons from 1993-2007, International Research Journal of Finance and Economics, Issue 26 (2009), pp. 41-59, http://www.eurojournals.com/irjfe 26 04.pdf.

With these numerical transformations and letting Fi,t, Mi,t, and Si,t be the numerical values of the Fitch, Moody’s and S&P’s ratings respectively, the LCR variable for country i at time t is created as:

where I{0,1,··· ,n} (Ji,t) is an indicator function that takes on a value of 1 if rating agency J has assigned a rating for country i in year t and 0 otherwise.

Table 1: Linear Transformation of Letter Ratings into Numeric Values

Table 1: Linear Transformation of Letter Ratings into Numeric Values

name:FCR

source: same as for LCR

description: Foreign Currency Rating: Issuer Ratings of sovereign borrower’s securities issued in foreign currency (usually $US) based on the ratings of the agencies Moody’s, Standard and Poor’s and Fitch. Same procedure was used to convert letter ratings into numerical values as for LCR

Economic variables – independent

name:gpd_cap and log_gdp_cap

source: World Bank Development Indicators, November 2010. Compiled for STATA. Catini, Giulia, Ugo Panizza and Carol Saade (2010), “Macro Data 4 Stata”

http://www.graduateinstitute.ch/md4stata

description:gpd_cap is nominal GDP per capita in current $US. log_gdp_cap is the natural log of gpd_cap.

name:ppp_gpd_cap and log_ppp_gdp_cap

source: World Bank Development Indicators, November 2010. Compiled for STATA. Catini, Giulia, Ugo Panizza and Carol Saade (2010), “Macro Data 4 Stata”

http://www.graduateinstitute.ch/md4stata

description:ppp_gpd_cap is PPP adjusted GDP per capita in $ international. log_ppp_gdp_cap is the natural log of ppp_gpd_cap.

name:inflation

source: World Bank World Development Indicators, International Monetary Fund In- ternational Financial Statistics and data files

http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG

description: Inflation as measured by the consumer price index reflects the annual percentage change in the cost to the average consumer of acquiring a basket of goods and services that may be fixed or changed at specified intervals, such as yearly. The Laspeyres formula is generally used.

name:debt_to_gdp

source: S. Ali Abbas, Nazim Belhocine, Asmaa ElGanainy, and Mark Horton, 2010. A Historical Public Debt Database, IMF Working Paper WP/10/245

http://www.imf.org/external/pubs/ft/wp/2010/wp10245.pdf

description: Total (domestic plus external) gross government debt/GDP.

name:share_ext_debt

source: “Macro Data 4 Stata” and Ugo Panizza (2007) “Domestic and External Public Debt in Developing Countries” UNCTAD discussion paper

http://www.graduateinstitute.ch/md4stata

description: Share of gross central government debt classified as external debt. External debt is defined as debt issued in foreign countries and under the jurisdiction of a foreign court.

name:CA_balance

source: World Bank WDI; International Monetary Fund, Balance of Payments Statistics Yearbook and data files, and World Bank and OECD GDP estimates.

http://data.worldbank.org/indicator/BN.CAB.XOKA.GD.ZS

description: Current account balance. The sum of net exports of goods, services, net income, and net current transfers.

Political variables

name:Legselec

source: Cross-National Time Series Data Archive

http://www.databanks.sitehosting.net/Default.htm

description: Legislative selection. The coding of this variable is as follows:

(0) None. No legislature exists.

(1) Nonelective. Examples would be the selection of legislators by the effective, executive or by means of heredity or ascription.

(2) Elective. Legislators (or members of the lower house in a bicameral system) are selected by means of either direct or indirect popular election.

name:Regtype

source: Cross-National Time Series Data Archive

http://www.databanks.sitehosting.net/Default.htm

description: Type of Regime. The coding of this variable is as follows:

(1) Civilian. Any government controlled by a nonmilitary component of the nation’s population

(2) Military-Civilian. Outwardly civilian government effectively controlled by a military elite. Civilians hold only those posts (up to and including that of Chief of State) for which their services are deemed necessary for successful conduct of government operations. An example would be retention of the Emperor and selected civilian cabinet members during the period of Japanese military hegemony between 1932 and 1945.

(3) Military. Direct rule by the military, usually (but not necessarily) following a military coup d’état. The governing structure may vary from utilization of the military chain of command under conditions of martial law to the institution of an ad hoc administrative hierarchy with at least an upper echelon staffed by military personnel.

(4) Other. All regimes not falling into one or another of the foregoing categories, including instances in which a country, save for reasons of exogenous influence, lacks an effective national government. An example of the latter would be Switzerland between 1815 and 1848.

name:XRCOMP

source: Polity IV Project, Political Regime Characteristics and Transitions, 1800-2009

http://www.systemicpeace.org/polity/polity4.htm

description: Competitiveness of Executive Recruitment. Competitiveness refers to the extent that prevailing modes of advancement give subordinates equal opportunities to become superordinates. For example, selection of chief executives through popular elections matching two or more viable parties or candidates is regarded as competitive. Coding is:

(1) Selection: Chief executives are determined by hereditary succession, designation, or by a combination of both, as in monarchies whose chief minister is chosen by king or court. Examples of pure designative selection are rigged, unopposed elections; repeated replacement of presidents before their terms end; recurrent military selection of civilian executives; selection within an institutionalized single party; recurrent incumbent selection of successors; repeated election boycotts by the major opposition parties, etc.

(2) Dual/Transitional: Dual executives in which one is chosen by hereditary succession, the other by competitive election. Also used for transitional arrangements between selection (ascription and/or designation) and competitive election.

(3) Election: Chief executives are typically chosen in or through competitive elections matching two or more major parties or candidates. (Elections may be popular or by an elected assembly.)

name:XROPEN

source: Polity IV Project, Political Regime Characteristics and Transitions, 1800-2009

http://www.systemicpeace.org/polity/polity4.htm

description: Openness of Executive Recruitment. Recruitment of the chief executive is “open” to the extent that all the politically active population has an opportunity, in principle, to attain the position through a regularized process. Coding is:

(1) Closed: Chief executives are determined by hereditary succession, e.g. kings, emperors, beys, emirs, etc. who assume executive powers by right of descent. An executive selected by other means may proclaim himself a monarch but the polity he governs is not coded “closed” unless a relative actually succeeds him as ruler.

(2) Dual Executive-Designation: Hereditary succession plus executive or court selection of an effective chief minister.

(3) Dual Executive-Election: Hereditary succession plus electoral selection of an effective chief minister.

(4) Open: Chief executives are chosen by elite designation, competitive election, or transitional arrangements between designation and election.

name:PARCOMP

source: Polity IV Project, Political Regime Characteristics and Transitions, 1800-2009

http://www.systemicpeace.org/polity/polity4.htm

description: Competitiveness of Participation. The competitiveness of participation refers to the extent to which alternative preferences for policy and leadership can be pursued in the political arena. Coding is:

(1) Repressed: No significant oppositional activity is permitted outside the ranks of the regime and ruling party. Totalitarian party systems, authoritarian military dictatorships, and despotic monarchies are typically coded here. However, the mere existence of these structures is not sufficient for a Repressed coding. The regime’s institutional structure must also be matched by its demonstrated ability to repress oppositional competition.

(2) Suppressed: Some organized, political competition occurs outside government, without serious factionalism; but the regime systematically and sharply limits its form, extent, or both in ways that exclude substantial groups (20% or more of the adult population) from participation. Suppressed competition is distinguished from Factional competition (below) by the systematic, persisting nature of the restrictions: large classes of people, groups, or types of peaceful political competition are continuously excluded from the political process. As an operational rule, the banning of a political party which received more than 10% of the vote in a recent national election is sufficient evidence that competition is “suppressed.” However, other information is required to determine whether the appropriate coding is (2) Suppressed or (3) Factional competition. This category is also used to characterize transitions between Factional and Repressed competition. Examples of “suppression” are:

  1. Prohibiting some kinds of political organizations, either by type or group of people involved (e.g., no national political parties or no ethnic political organizations).

  2. Prohibiting some kinds of political action (e.g., Communist parties may organize but are prohibited from competing in elections).

  3. Systematic harassment of political opposition (leaders killed, jailed, or sent into exile; candidates regularly ruled off ballots; opposition media banned, etc.). This is evidence for either Factional, Suppressed, or Repressed, depending on the nature of the regime, the opposition, and the persistence of political groups.

Note: A newly enacted right to engage in political activities is most likely a change from category 1 to 2.

(3) Factional: Polities with parochial or ethnic-based political factions that regularly compete for political influence in order to promote particularist agendas and favor group members to the detriment of common, secular, or cross-cutting agendas.

(4) Transitional: Any transitional arrangement from Restricted or Factional patterns to fully Competitive patterns, or vice versa. Transitional arrangements are accommodative of competing, parochial interests but have not fully linked parochial with broader, general interests. Sectarian and secular interest groups coexist.

(5) Competitive: There are relatively stable and enduring, secular political groups which regularly compete for political influence at the national level; ruling groups and coalitions regularly, voluntarily transfer central power to competing groups. Competition among groups seldom involves coercion or disruption. Small parties or political groups may be restricted in the Competitive pattern.

Summary statistics

2In Table 2 I present summary statistics for the variables used in my estimations. For the long term rates, I removed two observations for Slovenia in 1991 and 1992, where interest rates where above 180 percent – more than three times the largest of the remaining observations. I also removed outliers for inflation (annual rates above 500 percent, the 99th percentile being 340 percent).

Table 2: Summary Statistics for variables used in Section 3

Table 2: Summary Statistics for variables used in Section 3

Table des illustrations

URL http://books.openedition.org/iheid/docannexe/image/521/img-1.png
Fichier image/png, 13k
Titre Table 1: Linear Transformation of Letter Ratings into Numeric Values
URL http://books.openedition.org/iheid/docannexe/image/521/img-2.png
Fichier image/png, 39k
Titre Table 2: Summary Statistics for variables used in Section 3
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Fichier image/png, 125k

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