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Sovereign Risk: A Macro-Financial Perspective

Author

Listed:
  • Udaibir S. Das

    (Assistant Director and Division Chief, Monetary and Capital Markets Department, IMF)

  • Maria A. Oliva

    (Senior Economist, Monetary and Capital Markets Department, IMF)

  • Takahiro Tsuda

    (Financial Sector Expert, Monetary and Capital Markets Department, IMF)

Abstract

We examine some of the macro-financial dimensions of sovereign risk and propose a conceptual framework that captures risks other than just the default risk. Morphed under a multi-dimensional notion of sovereign risk, we argue that the existing empirical methodologies to measure sovereign risk cover only partial aspects of sovereign risk and fail to capture its macro-financial dimensions. We highlight a menu of tools that could be used to tackle the broader notion of sovereign risk, and suggest that authorities should actively use them to manage the macro financial dimensions of sovereign risk and before those risks feed into the real economy.

Suggested Citation

  • Udaibir S. Das & Maria A. Oliva & Takahiro Tsuda, 2012. "Sovereign Risk: A Macro-Financial Perspective," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 8(3), pages 367-392, August.
  • Handle: RePEc:mof:journl:ppr017g
    as

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    File URL: http://warp.ndl.go.jp/info:ndljp/pid/10248500/www.mof.go.jp/english/pri/publication/pp_review/ppr017/ppr017g.pdf
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    References listed on IDEAS

    as
    1. Das, Udaibir S. & Papaioannou, Michael G. & Trebesch, Christoph, . "Sovereign Default Risk and Private Sector Access to Capital in Emerging Markets," Chapters in Economics,, University of Munich, Department of Economics.
    2. Gelos, R. Gaston & Sahay, Ratna & Sandleris, Guido, 2011. "Sovereign borrowing by developing countries: What determines market access?," Journal of International Economics, Elsevier, vol. 83(2), pages 243-254, March.
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    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    5. Marcio Garcia & Roberto Rigobon, 2004. "A Risk Management Approach to Emerging Market's Sovereign Debt Sustainability with an Application to Brazilian Data," NBER Working Papers 10336, National Bureau of Economic Research, Inc.
    6. Mr. Manmohan Singh, 2011. "Velocity of Pledged Collateral: Analysis and Implications," IMF Working Papers 2011/256, International Monetary Fund.
    7. Dale F. Gray & Robert C. Merton & Zvi Bodie, 2007. "New Framework for Measuring and Managing Macrofinancial Risk and Financial Stability," NBER Working Papers 13607, National Bureau of Economic Research, Inc.
    8. Miss Gabriela Dobrescu & Iva Petrova & Nazim Belhocine & Mr. Emanuele Baldacci, 2011. "Assessing Fiscal Stress," IMF Working Papers 2011/100, International Monetary Fund.
    9. Aizenman, Joshua & Hutchison, Michael & Jinjarak, Yothin, 2013. "What is the risk of European sovereign debt defaults? Fiscal space, CDS spreads and market pricing of risk," Journal of International Money and Finance, Elsevier, vol. 34(C), pages 37-59.
    10. Roberto Rigobon & Marcio Garcia, 2004. "A Risk Management Approach to Emerging Market’s Sovereign Debt Sustainability with an application to Brazilian data," Econometric Society 2004 Latin American Meetings 24, Econometric Society.
    11. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
    12. Merler, S. & Pisani-Ferry, J., 2012. "Hazardous tango: sovereign-bank interdependence and financial stability in the euro area," Financial Stability Review, Banque de France, issue 16, pages 201-210, April.
    13. Mr. Udaibir S Das & Jay Surti & Mr. Faisal Ahmed & Mr. Michael G. Papaioannou & Mr. Guilherme Pedras, 2010. "Managing Public Debt and Its Financial Stability Implications," IMF Working Papers 2010/280, International Monetary Fund.
    14. Christoph Trebesch & Mr. Michael G. Papaioannou & Mr. Udaibir S Das, 2012. "Sovereign Debt Restructurings 1950-2010: Literature Survey, Data, and Stylized Facts," IMF Working Papers 2012/203, International Monetary Fund.
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    Cited by:

    1. Mr. Serkan Arslanalp & Mr. Takahiro Tsuda, 2012. "Tracking Global Demand for Advanced Economy Sovereign Debt," IMF Working Papers 2012/284, International Monetary Fund.
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