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Sovereign Risk Management in Recession: The Cases of Sweden and China

  • Zhang, Yuewen

Sovereign risk became a common issue after 2007 financial crisis happened. However, the crisis was only an incentive. Some high sovereign risk countries had lacked reliable sovereign risk management framework and lend overmuch debt before the crisis came. High cost of crisis and succeeding recession gave the world a critical strike. Using the cases of Sweden and China, I argue that fiscal expenditure constraints, debt control, and surplus accumulation in common time are most important measures to manage sovereign risk. A stable and efficient sovereign risk management regime framework is beneficial. A medium-term fiscal stability target should be included. Early intention, temporary stimulus policy and other budget measures could decrease cost of crisis and recession. A development domestic debt market could help relief refinancing pressure of government when some external shock happened. Perfect framework of statistics, specific accounting standard, high transparency will help the government, creditors, and investors reach some debt restructure agreement.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23364.

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Date of creation: 01 Jun 2010
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Handle: RePEc:pra:mprapa:23364
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  1. Patrick Honohan & Daniela Klingebiel, 2000. "Controlling fiscal costs of banking crises," Proceedings 682, Federal Reserve Bank of Chicago.
  2. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
  3. Audrey Desbonnet & Sumudu Kankanamge, 2008. "Public debt and aggregate risk," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00175877, HAL.
  4. S M Ali Abbas & Jakob E Christensen, 2010. "The Role of Domestic Debt Markets in Economic Growth: An Empirical Investigation for Low-Income Countries and Emerging Markets," IMF Staff Papers, Palgrave Macmillan, vol. 57(1), pages 209-255, April.
  5. Ethan Ilzetzki & Carlos A. Vegh, 2008. "Procyclical Fiscal Policy in Developing Countries: Truth or Fiction?," NBER Working Papers 14191, National Bureau of Economic Research, Inc.
  6. Sutherland, Alan, 1997. "Fiscal crises and aggregate demand: can high public debt reverse the effects of fiscal policy?," Journal of Public Economics, Elsevier, vol. 65(2), pages 147-162, August.
  7. Audrey Desbonnet & Sumudu Kankanamge, 2007. "Public debt and aggregate risk," Documents de travail du Centre d'Economie de la Sorbonne v07042, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  8. Henning Bohn, 2005. "The Sustainability of Fiscal Policy in the United States," CESifo Working Paper Series 1446, CESifo Group Munich.
  9. Frank Bohn, 2002. "Public Finance under Political Instability and Debt Conditionality," Economics Discussion Papers 540, University of Essex, Department of Economics.
  10. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc.
  11. Bank for International Settlements, 2007. "Financial stability and local currency bond markets," CGFS Papers, Bank for International Settlements, number 28, April.
  12. Honohan, Patrick & Klingebiel, Daniela, 2000. "Controlling the fiscal costs of banking crises," Policy Research Working Paper Series 2441, The World Bank.
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