Assessing new perspectives on country risk

BIS Quarterly Review  | 
06 December 2004
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We examine in a unified framework three recent perspectives on country risk: debt intolerance, original sin, and currency mismatches. We find statistical evidence supporting aspects of all three, though the strength of that support varies considerably across hypotheses and a number of open questions remain. Our evidence is consistent with the view that good domestic macroeconomic and structural policies hold the key to addressing country risk.

JEL classification: F30, G15.