Debt Vulnerability Analysis : A Multi-Angle Approach

Countries with high debt exposure are vulnerable to economic and financial shocks that could lead to sovereign defaults. This paper develops a methodology to identify countries that are at risk of debt default based on four elements of debt vulnera...

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Main Authors:	Doemeland, Doerte, Estevão, Marcello, Jooste, Charl, Sampi, James, Tsiropoulos, Vasileios
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2022
Subjects:	DEBT SUSTAINABILITY DEBT DEFAULT DEBT VULNERABILITY DEBT SERVICE BURDEN SOVEREIGN DEBT PUBLIC DEBT DEFAULT RISK
Online Access:	http://documents.worldbank.org/curated/en/514551644261687296/Debt-Vulnerability-Analysis-A-Multi-Angle http://hdl.handle.net/10986/36970

id	okr-10986-36970
recordtype	oai_dc
spelling	okr-10986-369702022-02-11T05:10:33Z Debt Vulnerability Analysis : A Multi-Angle Approach Doemeland, Doerte Estevão, Marcello Jooste, Charl Sampi, James Tsiropoulos, Vasileios DEBT SUSTAINABILITY DEBT DEFAULT DEBT VULNERABILITY DEBT SERVICE BURDEN SOVEREIGN DEBT PUBLIC DEBT DEFAULT RISK Countries with high debt exposure are vulnerable to economic and financial shocks that could lead to sovereign defaults. This paper develops a methodology to identify countries that are at risk of debt default based on four elements of debt vulnerability. These elements capture the different ways in which risks associated with high debt are assessed, namely: (i) the fundamental, (ii) the subjective, (iii) the judgmental, and (iv) the theoretical. The fundamental element considers the liquidity, solvency, and institutional risk elements of debt vulnerability. The subjective element captures the investors’ perceptions of debt default, while the judgmental element is based on the debt thresholds as defined by Debt Sustainability Frameworks. Finally, the theoretical element is normative and captures what ought to be. The methodology constructs an index for each of these four elements and uses them as predictors in a model of public debt default. The methodology flags countries that are at risk of default by means of machine learning techniques and delivers outputs that point to underlying causes of vulnerability. The methodology complements existing monitoring tools for assessing debt sustainability. 2022-02-10T15:33:14Z 2022-02-10T15:33:14Z 2022-02 Working Paper http://documents.worldbank.org/curated/en/514551644261687296/Debt-Vulnerability-Analysis-A-Multi-Angle http://hdl.handle.net/10986/36970 English Policy Research Working Paper;No. 9929 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	DEBT SUSTAINABILITY DEBT DEFAULT DEBT VULNERABILITY DEBT SERVICE BURDEN SOVEREIGN DEBT PUBLIC DEBT DEFAULT RISK
spellingShingle	DEBT SUSTAINABILITY DEBT DEFAULT DEBT VULNERABILITY DEBT SERVICE BURDEN SOVEREIGN DEBT PUBLIC DEBT DEFAULT RISK Doemeland, Doerte Estevão, Marcello Jooste, Charl Sampi, James Tsiropoulos, Vasileios Debt Vulnerability Analysis : A Multi-Angle Approach
relation	Policy Research Working Paper;No. 9929
description	Countries with high debt exposure are vulnerable to economic and financial shocks that could lead to sovereign defaults. This paper develops a methodology to identify countries that are at risk of debt default based on four elements of debt vulnerability. These elements capture the different ways in which risks associated with high debt are assessed, namely: (i) the fundamental, (ii) the subjective, (iii) the judgmental, and (iv) the theoretical. The fundamental element considers the liquidity, solvency, and institutional risk elements of debt vulnerability. The subjective element captures the investors’ perceptions of debt default, while the judgmental element is based on the debt thresholds as defined by Debt Sustainability Frameworks. Finally, the theoretical element is normative and captures what ought to be. The methodology constructs an index for each of these four elements and uses them as predictors in a model of public debt default. The methodology flags countries that are at risk of default by means of machine learning techniques and delivers outputs that point to underlying causes of vulnerability. The methodology complements existing monitoring tools for assessing debt sustainability.
format	Working Paper
author	Doemeland, Doerte Estevão, Marcello Jooste, Charl Sampi, James Tsiropoulos, Vasileios
author_facet	Doemeland, Doerte Estevão, Marcello Jooste, Charl Sampi, James Tsiropoulos, Vasileios
author_sort	Doemeland, Doerte
title	Debt Vulnerability Analysis : A Multi-Angle Approach
title_short	Debt Vulnerability Analysis : A Multi-Angle Approach
title_full	Debt Vulnerability Analysis : A Multi-Angle Approach
title_fullStr	Debt Vulnerability Analysis : A Multi-Angle Approach
title_full_unstemmed	Debt Vulnerability Analysis : A Multi-Angle Approach
title_sort	debt vulnerability analysis : a multi-angle approach
publisher	World Bank, Washington, DC
publishDate	2022
url	http://documents.worldbank.org/curated/en/514551644261687296/Debt-Vulnerability-Analysis-A-Multi-Angle http://hdl.handle.net/10986/36970
_version_	1764486302163533824

Debt Vulnerability Analysis : A Multi-Angle Approach

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