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A New Approach on Country Risk Monitoring

Author

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  • Christos E. Kountzakis

    (Department of Statistics and Actuarial-Financial Mathematics, University of the Aegean, GR-83200 Karlovassi, Samos, Greece)

  • Christos Floros

    (Department of Accounting and Finance, Hellenic Mediterranean University, GR-71004 Heraklion, Crete, Greece)

Abstract

Most of indexes regarding Credit Rating of the national debt bonds are associated to Gross National Product, which involves the well-known Keynesian Multiplicator of the IS-LM Equilibrium. Specifically, a common way of Sovereign Debt evaluation is its percentage of the Gross National Product in terms of a spot value. Another index is the spot value of the percentage of the annual interest rate payments of the state to the owners of sovereign debt. These indexes provide an inefficient evaluation of the national debt and moreover they are sensitive in their calculative aspect. Hence, we propose another index of national debt evaluation, which is more realistic, since public debt is a part of the balance sheet of the state itself. Moreover, this index may be translated into growth variables of the national economy. Since Gross National Product relies on consumption of the Economy, more consumption implies an ’illusion’ about sovereign debt. On the other hand, this index has limits to its credibility because it depends on the size of the annual investments.

Suggested Citation

  • Christos E. Kountzakis & Christos Floros, 2025. "A New Approach on Country Risk Monitoring," Risks, MDPI, vol. 13(5), pages 1-12, April.
    • Handle: RePEc:gam:jrisks:v:13:y:2025:i:5:p:80-:d:1639544
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    References listed on IDEAS

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    1. Arellano, Cristina & Kocherlakota, Narayana, 2014. "Internal debt crises and sovereign defaults," Journal of Monetary Economics, Elsevier, vol. 68(S), pages 68-80.
    2. Elgin, Ceyhun & Uras, Burak R., 2013. "Public debt, sovereign default risk and shadow economy," Journal of Financial Stability, Elsevier, vol. 9(4), pages 628-640.
    3. Bulow, Jeremy & Rogoff, Kenneth, 1989. "Sovereign Debt: Is to Forgive to Forget?," American Economic Review, American Economic Association, vol. 79(1), pages 43-50, March.
    4. International Monetary Fund, 2017. "Portugal: Fifth Post Program Monitoring Discussions-Press Release; Staff Report; and Statement by the Executive Director for Portugal," IMF Staff Country Reports 2017/058, International Monetary Fund.
    5. Christos Floros & Dimitrios Vortelinos & Ioannis Chatziantoniou, 2024. "Crises and Contagion in Equity Portfolios," Economies, MDPI, vol. 12(7), pages 1-32, July.
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