Biglaiser, DeRouen, and Archer (2010)- Politics, Early Warning Systems, and Credit Ratings Agencies

Biglaiser, DeRouen, and Archer (2010)- Politics, Early Warning Systems, and Credit Ratings Agencies

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Politics, Early Warning Systems, and Credit Rating Agencies By: Glen Biglaiser, Karl DeRouen, Jr., and Candace C. Archer (Forthcoming) Biglaiser, Glen, Karl DeRouen, Jr., and Candace C. Archer. Forthcoming. “Politics, Early Warning Systems, and Credit Rating Agencies.” Abstract: The financial crisis in the late 1990s and the ongoing crisis should have shown the importance of creating an early warning system (EWS) to lessen economic, political, and foreign policy fallout. Surprisingly, the EWS literature rarely considers the role of political institutions to detect economic dangers that can be harbingers of conflict. Controlling for common explanations in the literature, we use panel data for fifty developing countries 1987-2004 to investigate the effect of political determinants for predicting economic crises. Although most political variables appear to have little influence in forecasting defaults or currency crises, models specified with bond ratings from the credit rating agencies can be helpful; for predicting the onset of crisis. Our
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Biglaiser, DeRouen, and Archer (2010)- Politics, Early Warning Systems, and Credit Ratings Agencies

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