Political instability and country risk: new evidence

Abstract

This note presents new estimates of a probit model for the debt rescheduling, using a sample of 65 countries over the period 1984–93. Apart from economic variables, a whole range of indicators for political instability are included in the model as explanatory variables. It turns out, that none is significant with the ‘correct’ sign. Apparently, a detoriation of the political situation is already reflected in economic aggregates, which suggest that the influence of political factors is discounted in macroeconomic variables as included in the model.