Sovereign Risk: A Reappraisal
11 Pages Posted: 6 Jan 2014
Date Written: December 31, 2013
Abstract
The Greek drama of the late 2000s has returned sovereign risk awareness to centre stage. The default affected a country with a relatively developed economy. It resulted in huge losses for the value of domestic assets: public debt, but also private debt, equity, real estate and furthermore pension rights and human capital. The burden has, not entirely but importantly, fallen on residents.
The questions that arise from the possibility of sovereign default impacting the sovereign’s subjects are how to properly assess the risk, what the fallout from its occurrence would be and what precautionary measures should be taken. International diversification is part of the answer.
Keywords: Sovereign risk, public finance, public debt, solvency, restructuration, taxation, sustainability, risk assessment, asset allocation
JEL Classification: E62, G11, H2, H6
Suggested Citation: Suggested Citation