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The author wishes to thank Tobjorn Becker, Jorge Chan Lau, Piti Disyatat, Donald Mathieson, Laura Papi, and Anthony Richards for valuable comments, and J.P. Morgan Chase, Silvia Iorgova and Peter Tran for their assistance with the data.
We convert S&P’s and Moody’s ratings to numerical values using a linear scale from 0 to 20 with SD and CC/Ca ratings corresponding to values of zero and 1 respectively, and AAA/Aaa ratings being assigned a value of 20.
We do not fit the model for the period before the Peso crisis because of too short an horizon.