A Risk Management Approach to Emerging Market’s Sovereign Debt Sustainability with an Application to Brazilian Data
AbstractIn this paper we study the question of debt sustainability from a risk management perspective. The debt accumulation equation for any country involves variables that are stochastic and closely intertwined. When these aspects are taken into consideration the notion of debt sustainability is expanded to studying the stochastic properties of the debt dynamics. We illustrate the methodology by studying the Brazilian case. We find that even though the debt could be sustainable in the absence of risk, there are paths in which it is clearly unsustainable. Furthermore, we show that properties of the debt dynamics are closely related to the spreads on sovereign dollar denominated debt.
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Bibliographic InfoPaper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 484.
Length: 23 pages
Date of creation: Apr 2004
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Public Debt; Debt Sustainability; Country Risk; Brazil JEL Codes: F34; F37; G15;
Other versions of this item:
- 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.
- F3 - International Economics - - International Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-07-26 (All new papers)
- NEP-FIN-2004-07-26 (Finance)
- NEP-RMG-2004-07-26 (Risk Management)
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"Debt management in Brazil: evaluation of the Real Plan and challenges ahead,"
Textos para discussÃ£o
408, Department of Economics PUC-Rio (Brazil).
- Bevilaqua, Afonso S & Garcia, Marcio G P, 2002. "Debt Management in Brazil: Evaluation of the Real Plan and Challenges Ahead," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(1), pages 15-35, January.
- Bevilaqua, Alfonso S. & Garcia, Marcio G. P., 2000. "Debt management in Brazil : evaluation of the Real Plan and challenges ahead," Policy Research Working Paper Series 2402, The World Bank.
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