TY  - JOUR
AU  - Garcia,Marcio
AU  - Rigobon,Roberto
TI  - A Risk Management Approach to Emerging Market's Sovereign Debt Sustainability with an Application to Brazilian Data
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10336
PY  - 2004
Y2  - March 2004
UR  - http://www.nber.org/papers/w10336
L1  - http://www.nber.org/papers/w10336.pdf
N1  - Author contact info:
Marcio Garcia
Department of Economics
PUC-Rio
Rua Marques de Sao Vicente, 225
Gavea-Rio de Janeiro 22451-041 BRAZIL
Tel: 011552135271078
Fax: 011552135271084
E-Mail: mgarcia@econ.puc-rio.br

Roberto Rigobon
MIT Sloan School of Management
100 Main Street, E62-516
Cambridge, MA 02142
Tel: 617/258-8374
Fax: 617/258-6855
E-Mail: rigobon@mit.edu
AB  - 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.
ER  -