Lifting the hood of the LIC-DSF to revamp its accuracy and transparency

Clemens Graf Von Luckner

No 2407, FDL Policy Notes from CEPREMAP

Abstract: This note by Clemens Graf von Luckner aims to achieve two goals: 1. "lifting the hood" of the LIC-DSF to analyze its mechanics for predicting the risk of debt distress; and 2. Identifying the shortcomings of the current model. The first section of the paper explores the complex steps involved in transforming projections (especially of debt indicators such as external public debt in present value to GDP; or debt services to revenues) into a risk measure: how likely is this country to default? The second section reveals that a number of choices made to accomplish this task lack transparency and efficiency. Graf von Luckner proposes a more straightforward procedure that reduces the risks of manipulation and the sharp discontinuities that have plagued recent debt restructurings.

Keywords: Sovereign Debt; Debt Sustainability; Economic Development; Low-Income Countries (search for similar items in EconPapers)
Pages: 21 pages
Date: 2024-10
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:cpm:notfdl:2407

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