POLITICAL INSTABILITY AND COUNTRY RISK - NEW EVIDENCE

This note presents new estimates of a probit model for the debt resche duling, using a sample of 65 countries over the period 1984-93. Apart from economic variables, a whole range of indicators for political ins tability are included in the model as explanatory variables. It turns out, that none is significant with the 'correct' sign. Apparently, a d etoriation 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.