A Risk-Based Debt Sustainability Framework: Incorporating Balance Sheets and Uncertainty

Dale Gray, Elena Loukoianova (eloukoianova@imf.org), Samuel Malone and Cheng Lim

No 2008/040, IMF Working Papers from International Monetary Fund

Abstract: This paper proposes a new framework for the analysis of public sector debt sustainability. The framework uses concepts and methods from modern practice of contingent claims to develop a quantitative risk-based model of sovereign credit risk. The motivation in developing this framework is to provide a clear and workable complement to traditional debt sustainability analysis which-although it has many useful applications-suffers from the inability to measure risk exposures, default probabilities and credit spreads. Importantly, this new framework can be adapted for policy analysis, including debt and reserve management.

Keywords: WP; debt; currency debt; risk premium (search for similar items in EconPapers)
Pages: 25
Date: 2008-02-01
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Citations: View citations in EconPapers (21)

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