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Modeling Country Risks: An Asian Perspective, Swee Liang Tan, G. K. Randolph Tan
Modeling Country Risks: An Asian Perspective, Swee Liang Tan, G. K. Randolph Tan
Research Collection School Of Economics
This paper investigates the use of the Markov Regime Switching Model (MRSM) as a means to track changes in the levels of investor confidence. It also assesses the probabilities of a country switching between different regimes using the transition probability matrix. A maximum of three possible levels or regimes of risk – low, intermediate and high volatility regimes, is considered. From the smoothed probabilities calculated for different regimes, this paper makes inferences about timings of debt crisis. Comparing Brazil, Mexico, the Philippines and Indonesia in particular, we date the onset and subsequent dissolution of crisis-induced panic. We give interpretations of …