Poor country; SR; only government can borrow abroad
Moving currencies facilities, changing local currency into foreign
currency
Liquidity vs solvency, timeframe.
Country risk science: systematic, assumptions (being shared), not
cause and effect, not a science, a lot of judgment. It’s a science
because models are being use, it very systematic….
Science
Yes:
Systemic models to interpret data
Explicit assumptions
Underlaying models
Use maths to understand how humans makes choices
How humans change their behaviour ( history)
Changes is society change country risk analysis
It’s a social science.
No:
No judgements
Not permanent
No inducte from data to theory
Sec buyback ruling 1972
Is country risk an art?
Yes:
Ctrate something new
Some creativity involve
Predicting the unpredictable is also an art.
No:
No creativity (interpretation, we use creativity)
Bland to make
We don’t have nothing in exchange
Optimize for profit
Diagnostic tool
Government borrows money: where does it end? Money need to ve
invested. Real economic growth rate higher than the interest rate the
government pays for its debt. Government debt being unsustanable
Myth 2 is false
Myth 4: default no pay debt, all or nothing, fist stop paying the
interest
Diference between. The government have arrays and the
government is in default.
Late=arrear
Defoulf= the government id 30 day late, longer than 30.
You can give more time to countries
Debt can be written off, repay less money to another country.
Year concrete examples
Exchange rate, buy and sell currencies to maintain the peg.
Causality, cause -effect relationships.
Trade balance, goods
Services balance
Risk-model assume lower risk is 0 and the greater is 100.
X axes. Possible values of my indicator
Y axes. Country risk level.
One curve for each variable, one model for all countries
Put all data conicnation in excel in order to make tha graph.