The Macroeconomic Imbalance ProcedureA useful tool for predicting sovereign crises?

  1. Alfredo Arahuetes García
  2. Gonzalo Gómez Bengoechea
Journal:
Estudios de economía

ISSN: 0304-2758,  0718-5286

Year of publication: 2018

Volume: 45

Issue: 1

Pages: 79-111

Type: Article

DOI: 10.4067/S0718-52862018000100079 DIALNET GOOGLE SCHOLAR lock_openDialnet editor

More publications in: Estudios de economía

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Abstract

This paper provides an empirical analysis of the Macroeconomic Imbalance Procedure (MIP). It explores the relationship between sovereign bond yields spreads and the variables contained in the MIP scoreboard using quantile regressions. Results suggest that MIP indicators can explain the behavior of sovereign spreads two, three and four quarters in advance. The scoreboard can’t capture strong non-variant country effects that affect the evolution of spreads as well as the different impact that each indicator has on different countries. The introduction of employment indicators has reduced the aggregate effect that country effects have on sovereign spreads.

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