A Risk-Based Debt Sustainability Framework: Incorporating Balance Sheets and Uncertainty
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Summary:
This paper proposes a new framework for the analysis of public sector debt sustainability. The framework uses concepts and methods from modern practice of contingent claims to develop a quantitative risk-based model of sovereign credit risk. The motivation in developing this framework is to provide a clear and workable complement to traditional debt sustainability analysis which-although it has many useful applications-suffers from the inability to measure risk exposures, default probabilities and credit spreads. Importantly, this new framework can be adapted for policy analysis, including debt and reserve management.
Series:
Working Paper No. 2008/040
Subject:
Debt sustainability Debt sustainability analysis Foreign currency debt Local currency debt Public debt
English
Publication Date:
February 1, 2008
ISBN/ISSN:
9781451869026/1018-5941
Stock No:
WPIEA2008040
Pages:
25
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