Sovereign debt dynamics in a stochastic environment

The thesis incorporates into the assessment of sovereign debt sustainability the volatility and correlation of macroeconomic variables by studying how the probability distribution of sovereign debt to GDP ratios depends on the stochastic properties of the underlying variables such as the real interest rate, the real growth rate and the primary budget deficit. Using the right-hand tail of this distribution as a measure of the risk, we are able to show how the volatility of the underlying variables, as well as potential interactions between them, influences country risk. The thesis examines as well "the endogenous response" of current interest risk premium from future sovereign debt distribution and especially its right hand tail as a proxy variable for effectively combining macroeconomic variable volatilities. What matters most for the market participant is not the expected value of public debt but the expected probability that the debt could go above a certain threshold, above which there is a high chance of defaulting


Publication infos:
Genève, Institut universitaire de hautes études internationales, 2008
Publication year:
2008
Number of pages:
XIV, 95 p.
PhD Director(s):
Directeur de thèse: Professeur Hans Genberg
Call number:
HEITH 757



 Record created 2011-06-03, last modified 2018-01-28


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