debt portfolio and the terms of new borrowing to estimate default probabilities. These include the effective interest rate and the average time to maturity of the portfolio, both defined below.

# **3. Data and stylized facts**

We use a database mirroring an extensive subset of the choice of variables in Manasse et al. (2003) and Fioramanti (2008).<sup>2</sup> The dataset contains information on 16 variables which cover representative regressors from the thematic groups defined above (see Table 2 for a description of the covariates used). In all cases, the frequency is annual. We construct an unbalanced panel of 46 EMCs in the period 1980‐2004. Table 3 presents a list with all countries included in the dataset.

The dependent variable is a binary variable taking value one if a given country is defined to be in default at a given year. A country/year is defined to be in a debt crisis if it is classified as being in default by Standard & Poor’s or if it receives a large non‐concessional International Monetary Fund (IMF) loan defined as access in excess of 100 percent of the country’s IMF quota. The default episodes are listed in Standard & Poor’s (2004), while non‐ concessional loan are drown from IMF _International Financial Statistics_ (IFS) database. This definition corresponds to the criterion used in Manasse et al. (2003) to identify debt crises.

On the regressors’ side, we include proxies for the most important determinants of sovereign defaults considered in the literature as cited in Table 1. Explanatory variables are sourced from IMF‘s _World Economic Outlook_ (WEO) and IFS databases, and the World Bank‘s _Global Development Finance_ (GDF) database. The Country policy and Institutional Assessment (CPIA) was obtained from the World Bank.<sup>3</sup> From GDF, we also obtain two _debt management variables_ : effective interest rate and average time to maturity of the portfolio. Each of them represents a different cost and relates to risks which debt managers are expected to minimize. The _effective interest rate_ ‐‐ calculated as interest rate payments in year _t,_ divided by the stock of debt at the end of _t­1,_ or the average interest payment per unit of debt ‐‐ represents a classical measure of the cost of servicing the existing debt portfolio. An increase in this variable signals higher cost for existing debt and an elevated pressure on the fiscal balance.

On the other hand, the _average time to maturit_ y measures the average time of rolling over of the existing portfolio. A shortening of this indicator suggests that the portfolio is being rolled over more frequently, and therefore, is more exposed to refinancing shocks. This variable refers to new debt and should thus be considered a concept related to marginal costs of debt accumulation.

Table 4 presents descriptive statistics for the variables in our dataset. We present statistics over the full sample and group countries according to their level of indebtedness over the sample period into two subsamples. A country belongs to the _low debt level group_ those

> 2 We are very grateful to Marco Fioramanti for kindly sharing his dataset with us.

> 3 The CPIA rates countries on a scale from 1 to 6, with higher values indicating better quality of policies and institutions

4