A new estimation technique of sovereign default risk

Artikel

Using the fixed-point theorem, sovereign default models are solved by numerical value function iteration and calibration methods, which due to their computational constraints, greatly limits the models' quantitative performance and foregoes its country-specific quantitative projection ability. By applying the Hotz-Miller estimation technique (Hotz and Miller, 1993)- often used in applied microeconometrics literature- to dynamic general equilibrium models of sovereign default, one can estimate the ex-ante default probability of economies, given the structural parameter values obtained from country-specific business-cycle statistics and relevant literature. Thus, with this technique we offer an alternative solution method to dynamic general equilibrium models of sovereign default to improve upon their quantitative inference ability.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Central Bank Review (CBR) ; ISSN: 1303-0701 ; Volume: 16 ; Year: 2016 ; Issue: 4 ; Pages: 119-125 ; Amsterdam: Elsevier

Classification and Topics

• Classification: Wirtschaft
• Subject: Sovereign default risk ; Hotz-Miller estimation ; Endogenous default risk ; Conditional choice probabilities ; PML ; GMM

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Soytas, Mehmet Ali ; Volkan, Engin
• Event: Veröffentlichung
• (who): Elsevier
• (where): Amsterdam
• (when): 2016

Further information

• DOI: doi:10.1016/j.cbrev.2016.11.002
• Handle: http://hdl.handle.net/10419/217297
• Last update: 10.03.2025, 11:43 AM CET