Lessons From The Financial Crisis On Modelling Systemic And Sovereign Risk

The complex interactions, spillovers and feedbacks of the global crisis that began in 2007 remind us how important it is to improve the authors' analyzes and modelling of financial crises and sovereign risk. This paper provides a broad framework to examine how vulnerabilities can build up and suddenly erupt in a financial crisis with potentially disastrous feedback effects for sovereign debt and economic growth. Traditional macroeconomic analysis overlooks the importance of risk, which makes it ill suited to examine interconnectedness and transmission mechanisms in response to common shocks.

Provided by: International Monetary Fund Topic: CXO Date Added: Dec 2010 Format: PDF

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