A Risk Management Approach to Emerging Market’s Sovereign Debt Sustainability with an application to Brazilian data

Roberto Rigobon and Marcio Garcia

No 24, Econometric Society 2004 Latin American Meetings from Econometric Society

Abstract: In this paper we study the question of debt sustainability from a risk management perspective. The debt accumulation equation for any country involves variables that are stochastic and closely intertwined. When these aspects are taken into consideration the notion of debt sustainability is expanded to studying the stochastic properties of the debt dynamics. We illustrate the methodology by studying the Brazilian case. We find that even though the debt could be sustainable in the absence of risk, there are paths in which it is clearly unsustainable. Furthermore, we show that properties of the debt dynamics are closely related to the spreads on sovereign dollar denominated debt

Keywords: Public Debt; Debt Sustainability; Country Risk; Brazil (search for similar items in EconPapers)
JEL-codes: F34 F37 G15 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-fin and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

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Persistent link: https://EconPapers.repec.org/RePEc:ecm:latm04:24

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