IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/10336.html
   My bibliography  Save this paper

A Risk Management Approach to Emerging Market's Sovereign Debt Sustainability with an Application to Brazilian Data

Author

Listed:
  • Marcio Garcia
  • Roberto Rigobon

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.

Suggested Citation

  • Marcio Garcia & Roberto Rigobon, 2004. "A Risk Management Approach to Emerging Market's Sovereign Debt Sustainability with an Application to Brazilian Data," NBER Working Papers 10336, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10336
    Note: IFM
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w10336.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alessandro Missale & Francesco Giavazzi & Pierpaolo Benigno, 2002. "How is the Debt Managed? Learning from Fiscal Stabilizations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(3), pages 443-469, September.
    2. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
    3. repec:rus:hseeco:123922 is not listed on IDEAS
    4. Rothenberg, Thomas J. & Stock, James H., 1997. "Inference in a nearly integrated autoregressive model with nonnormal innovations," Journal of Econometrics, Elsevier, vol. 80(2), pages 269-286, October.
    5. Bevilaqua, Afonso S & Garcia, Marcio G P, 2002. "Debt Management in Brazil: Evaluation of the Real Plan and Challenges Ahead," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(1), pages 15-35, January.
    6. Márcio Gomes Pinto Garcia, 2002. "Public debt management, monetary policy and financial institutions," Textos para discussão 464, Department of Economics PUC-Rio (Brazil).
    7. Eliana Cardoso & Ilan Goldfajn, 1998. "Capital Flows to Brazil: The Endogeneity of Capital Controls," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 161-202, March.
    8. Márcio Gomes Pinto Garcia & Tatiana Didier, 2000. "Very high interest rates and the cousin risks: Brazil during the Real Plan," Textos para discussão 441, Department of Economics PUC-Rio (Brazil).
    9. Márcio gomes Pinto Garcia & Marcus Vinicius Ferrero Valpassos, 1998. "Capital flows, capital controls and currency crisis: the case of Brazil in the nineties," Textos para discussão 389, Department of Economics PUC-Rio (Brazil).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roberto Rigobon & Marcio Garcia, 2004. "A Risk Management Approach to Emerging Market’s Sovereign Debt Sustainability with an application to Brazilian data," Econometric Society 2004 Latin American Meetings 24, Econometric Society.
    2. Jean-Pierre Allegret, 2000. "Quel role pour les controles des mouvements internationaux de capitaux ?," Economie Internationale, CEPII research center, issue 81, pages 77-108.
    3. Nicolas E. Magud & Carmen M. Reinhart & Kenneth S. Rogoff, 2018. "Capital Controls: Myth and Reality--A Portfolio Balance Approach," Annals of Economics and Finance, Society for AEF, vol. 19(1), pages 1-47, May.
    4. Nicolas Magud & Carmen M. Reinhart, 2007. "Capital Controls: An Evaluation," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, pages 645-674, National Bureau of Economic Research, Inc.
    5. Manoel Carlos de Castro Pires, 2006. "Uma Análise de Credibilidade na Política Fiscal Brasileira," Discussion Papers 1222, Instituto de Pesquisa Econômica Aplicada - IPEA.
    6. Bozhechkova, Alexandra (Божечкова, Александра) & Goryunov, Evgeny (Горюнов, Евгений) & Sinelnikov-Murylev, Sergey (Синельников-Мурылев, Сергей) & Trunin, Pavel V. (Трунин, Павел), 2017. "Capital Controls: World Experience and Lessons for Russia [Ограничения На Движение Капитала: Мировой Опыт И Уроки Для России]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 2, pages 8-43, April.
    7. Nicolas Magud & Carmen Reinhart & Kenneth Rogoff, 2005. "Capital Controls: Myth and Reality A Portfolio Balance Approach to Capital Controls," University of Oregon Economics Department Working Papers 2006-10, University of Oregon Economics Department.
    8. Nicolas Magud & Carmen Reinhart & Kenneth Rogoff, 2005. "Capital Controls: Myth and Reality A Portfolio Balance Approach to Capital Controls," University of Oregon Economics Department Working Papers 2006-10, University of Oregon Economics Department.
    9. Ilan Goldfajn & André Minella, 2007. "Capital Flows and Controls in Brazil: What Have We Learned?," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, pages 349-420, National Bureau of Economic Research, Inc.
    10. Alessandro Missale & Francesco Giavazzi, 2003. "Public Debt Management in Brazil," Development Working Papers 178, Centro Studi Luca d'Agliano, University of Milano.
    11. Abhijit Sen Gupta, 2010. "Management of International Capital Flows: The Indian Experience," Competence Centre on Money, Trade, Finance and Development 1003, Hochschule fuer Technik und Wirtschaft, Berlin.
    12. M. Buch, Claudia & Hanschel, Elke, 2000. "The Effectiveness of Capital Controls: The Case of Slovenia," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 602-628.
    13. Manuel Funke & Moritz Schularick & Christoph Trebesch, 2023. "Populist Leaders and the Economy," American Economic Review, American Economic Association, vol. 113(12), pages 3249-3288, December.
    14. Kelbesa Megersa & Danny Cassimon, 2015. "Public Debt, Economic Growth, and Public Sector Management in Developing Countries: Is There a Link?," Public Administration & Development, Blackwell Publishing, vol. 35(5), pages 329-346, December.
    15. Christoph Trebesch, 2019. "Resolving sovereign debt crises: the role of political risk," Oxford Economic Papers, Oxford University Press, vol. 71(2), pages 421-444.
    16. Aguiar, M. & Chatterjee, S. & Cole, H. & Stangebye, Z., 2016. "Quantitative Models of Sovereign Debt Crises," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1697-1755, Elsevier.
    17. Samir Jahjah & Bin Wei & Vivian Zhanwei Yue, 2013. "Exchange Rate Policy and Sovereign Bond Spreads in Developing Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(7), pages 1275-1300, October.
    18. Seung Jung Lee, 2009. "How Information Quality of Macro Aggregates Affects Sovereign Risk: An Empirical Investigation," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 510-532, August.
    19. Victor A. Beker, 2016. "The European Debt Crisis," Financial and Monetary Policy Studies, in: Modern Financial Crises, edition 127, chapter 0, pages 135-160, Springer.
    20. Faria, Andr & Mauro, Paolo, 2009. "Institutions and the external capital structure of countries," Journal of International Money and Finance, Elsevier, vol. 28(3), pages 367-391, April.

    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:10336. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.