Macroeconomic Volatility, Debt Dynamics, and Sovereign Interest Rate Spreads
AbstractWhile the relationship between volatility and risk is central to much of the financial literature it has not been incorporated systematically into assessment of sovereign debt sustainability. This paper attempts to fill this gap by studying how the probability distribution of sovereign debt to GDP ratios depends on the stochastic properties of underlying macroeconomic variables. Using the right hand-tail of the distribution as a measure of the risk we are able to show how the volatility of the underlying variables as well as potential interactions between them influence country risk.
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Bibliographic InfoPaper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 182005.
Length: 25 pages
Date of creation: Oct 2005
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Macroeconomic volatility; debt dynamics; sovereign spreads;
Other versions of this item:
- Genberg, Hans & Sulstarova, Astrit, 2008. "Macroeconomic volatility, debt dynamics, and sovereign interest rate spreads," Journal of International Money and Finance, Elsevier, vol. 27(1), pages 26-39, February.
- Hans Genberg & Astrit Sulstarova, 2004. "Macroeconomic volatility, debt dynamics, and sovereign interest rate spreads," IHEID Working Papers 03-2004, Economics Section, The Graduate Institute of International Studies.
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
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