Description

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.

Taxonomy

Economic sectors , Public sector

More publications in this series: Working Papers

More publications by: Dale F Gray ; Elena Loukoianova ; Samuel W Malone ; Cheng Hoon Lim