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.
📌 3 Key Takeaways
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Objective & Hypothesis:Using theŞxed-point theorem, sovereign default models are solved by numerical value function iterationand calibration methods, which due to their computational constraints, greatly limits the models'quantitative performance and foregoes its country-speciŞc quantitative projection ability.
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Key Findings & Data:By applyingthe Hotz-Miller estimation technique (Hotz and Miller, 1993)- often used in applied microeconometricsliterature- to dynamic general equilibrium models of sovereign default, one can estimate the ex-antedefault probability of economies, given the structural parameter values obtained from country-speciŞcbusiness-cycle statistics and relevant literature.
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Conclusion & Impact: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.
🔬Design:Modeling & Simulation
📍Scope:Comprehensive Sample
⚙️Variables:Domain Parameters
Abstract
Using theŞxed-point theorem, sovereign default models are solved by numerical value function iterationand calibration methods, which due to their computational constraints, greatly limits the models'quantitative performance and foregoes its country-speciŞc quantitative projection ability. By applyingthe Hotz-Miller estimation technique (Hotz and Miller, 1993)- often used in applied microeconometricsliterature- to dynamic general equilibrium models of sovereign default, one can estimate the ex-antedefault probability of economies, given the structural parameter values obtained from country-speciŞcbusiness-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.
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Cite This Article
SOYTAŞ, M. A., VOLKAN, E. (2016). A new estimation technique of sovereign default risk. Central Bank Review, Cilt: 16 - Sayı: 4, 119–125. https://ajindex.com/articles/144373
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