A New Approach on Country Risk Monitoring

Christos E. Kountzakis and Christos Floros ()
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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

Risks, 2025, vol. 13, issue 5, 1-12

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.

Keywords: credit rating of national debt; stock and flow methods of credit rating; debt repudiation (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
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