Abstract This paper has developed an early warning system of sovereign debt crisis based on BP neural networks method. By using data on macro-economy and debt of 54 developing countries from 1991 to 2006, this paper reveals that the early warning system can effectively predict sovereign debt crisis in the following three years and its overall effect is 86.7%. Furthermore, ANN has an advantage over binary Logistic model in the prediction of sovereign debt crisis.
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Received: 27 April 2010
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