Sovereign Risk: A Macro-Financial Perspective

Udaibir S. Das, Maria A. Oliva and Takahiro Tsuda
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Udaibir S. Das: Asian Development Bank Institute (ADBI)

Governance Working Papers from East Asian Bureau of Economic Research

Abstract: We examine some of the macro-financial dimensions of sovereign risk and propose a conceptual framework that captures risks other than just the default risk. Morphed under a multi-dimensional notion of sovereign risk, we argue that the existing empirical methodologies to measure sovereign risk cover only partial aspects of sovereign risk and fail to capture its macro-financial dimensions. We highlight a menu of tools that could be used to tackle the broader notion of sovereign risk, and suggest that authorities should actively use them to manage the macro-financial dimensions of sovereign risk before those risks feed into the real economy.

Keywords: sovereign risk; macro-financial dimensions; default risk (search for similar items in EconPapers)
JEL-codes: E43 F30 F34 (search for similar items in EconPapers)
Date: 2012-10
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