Search results for "debt sustainability analysis"

showing 3 items of 3 documents

Risk Management for Sustainable Sovereign Debt Financing

2021

We model sovereign debt sustainability with optimal financing decisions under macroeconomic, financial, and fiscal uncertainty, with endogenous risk and term premia. Using a coherent risk measure we trade-off debt stock and flow risks subject to sustainability constraints. We optimize static and dynamic financing strategies and demonstrate economically significant savings from optimal financing compared with simple rules and consols, and find that optimizing the trade-offs can be critical for sustainability. The model quantifies minimum refinancing risk and maximum rate of debt reduction that a sovereign can achieve given its economic fundamentals, and an extension identifies optimal timing…

Coronavirus disease 2019 (COVID-19)business.industry05 social sciencesFinancial systemManagement Science and Operations ResearchComputer Science ApplicationsSettore SECS-S/06 -Metodi Mat. dell'Economia e d. Scienze Attuariali e Finanz.debt sustainability analysisrisk managementsovereign debtportfolio optimizationtail riskuncertainty0502 economics and businessFinancial crisisEconomicsTail risk050207 economicsPortfolio optimizationbusinessSovereign debtRisk management050205 econometrics Operations Research
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Political risks: the “red shift” in debt sustainability analysis

2020

Political stability and economic policy uncertainty can be key determinants of sovereign debt dynamics, and we show how they can be incorporated in debt sustainability analysis. We distinguish between short-term ambiguity and long-term uncertainty about political risk factors, and using a combination of narrative scenarios and calibrated probabilistic scenarios we obtain a comprehensive heatmap of high-risk debt dynamics. We use Italy as an interesting case study and demonstrate a “red shift” in the assessment of vulnerabilities when accounting for political risks. Ignoring these risks can lead to excessive optimism and wrong decisions.

La stabilità del sistema politico istituzionale e l'incertezza riguardo le politiche economiche sono due fattori chiave che possono influenzare la dinamica del debito pubblico. Nell'articolo si propone un modello di analisi della sostenibilità del debito sovrano che tenga conto dei fattori di rischio concernenti l'assetto istituzionale di un paese e le sue politiche economiche. In particolare distinguendo fra ambiguità a breve termine e incertezza a lungo termine dei fattori di rischio politico e utilizzando una combinazione di scenari narrativi e scenari probabilistici si costruisce una "heatmap" che permette di attribuire ad ogni politica fiscale la probabilità che l'obiettivo di riduzione dello stock di debito o del deficit sia soddisfatto. Il modello è applicato al caso Italia. I risultati mostrano un "red shift" della vulnerabilità del debito pubblico italiano quando sono inclusi nell'analisi i fattori di rischio politico. Si può quindi concludere che ignorare i rischi derivanti dall'instabilità del sistema politico-istuzionale o quelli derivanti dall'incertezza delle politiche economiche può condurre a un eccessivo ottimismo e a conseguenti scelte sbagliate.n debt sustainability analysispolitical risksPolitical riskEconomic policymedia_common.quotation_subjectGeneral EngineeringRed shiftSettore SECS-S/06 -Metodi Mat. dell'Economia e d. Scienze Attuariali e Finanz.HD61DebtSustainabilityEconomicsred shiftRisk in industry. Risk managementmedia_commonRisk Management Magazine
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Auditing Public Debt Using Risk Management

2023

The Audit Office of the Republic of Cyprus conducted the first-ever audit of the country’s public debt, seeking answers to two key questions. Is government debt sustainable, and is debt financing efficient and effective in securing the lowest cost with acceptable risks? The audit’s findings were discussed by the parliament and can have significant ramifications for public finance. However, public debt management is quite complex, and the International Organization of Supreme Audit Institutions suggests that sufficient technical knowledge is essential in undertaking an audit, including an understanding of the uncertain macroeconomy, financing conditions, and government fiscal stance. We use…

debt financingperformance auditclimate riskdebt sustainability analysis
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