Revisiting the effects of country specific fundamentals on sovereign default risk

This paper re-examines the association of country-specific macroeconomic fundamentals and sovereign risk. Our analysis focuses on 26 countries, including both developed and emerging economies, during the period 2000-2009. For both groups, while inflation and twin deficits are associated with higher sovereign spreads, real growth shows negative effects on default risk. International reserves and exchange rate appreciations are associated with lower default risk in emerging markets.