Politics and Perceived Country Creditworthiness in International Banking

This paper marks a departure from most previous studies of country creditworthiness in international banking because it incorporates systematically generated quantitative indicators of political instability in the analysis. The authors empirically test for the effects of political instability on perceived country creditworthiness using data on thirty heavily indebted developing countries for the period 1967-86. In addition to economic factors, they examine the effects of three types of political instability--regime change, political legitimacy, and armed conflict. The authors also distinguish between proximate instability and chronic instability. They find significant effects of proximate instability--particularly in governmental regime--on indicators of countries' perceived creditworthiness. Copyright 1990 by Ohio State University Press.

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