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Public Debt: Risk Management and Restructuring Optimization

Objective

"Much we have been learning about the flawed design of eurozone form the current crisis. Non-optimality of euro as a
currency zone, banking system fragmentation, weak institutional structures, insufficient political integration, lagging
competitiveness and global imbalances, are all blamed for the crisis. At a country level problems are attributed, according to The World Bank and IMF, imprudent public debt management, weak macroeconomic management, and debt overhang.

Our project looks into these over-arching challenges with the broad objective to: ""Develop the capacity for risk management of public debt that can be used in response to crises, and to analyze policy proposals for debt restructuring and common assumption of debt in a currency union"". The eurozone crisis challenges us to develop our capabilities for public debt management and advance the state-of-the-art.This is the purpose of the project.
The four specific research tasks, taken together, advance the broad objective:
1. Develop an asset-and-liability management framework for risk management of public debt.
2. Operationalize the framework using multi-period stochastic programming integrated with multi-factor simulations.
3. Extend the optimization model to incorporate debt sustainability analysis and study debt restructuring of crisis countries.
4. Extend the simulation models to integrate current proposals for EU-bonds in public debt risk management.
The project is devoted to complementing existing skills and broadening the fellow's knowledge base to develop models for
asset-liability management optimization and EU-bond pricing, implement and calibrate them using market data, and
demonstrate their efficacy in addressing policy issues for public debt management in crisis countries. The models will
be tested in depth on the interesting case of Cyprus, for which we have special knowledge and data, on IMF stylized examples, and for the Italian and Argentinean debt where we also have access."

Field of science

  • /social sciences/sociology/globalization
  • /social sciences/political science/political policy/public policy
  • /social sciences/other social sciences/social sciences interdisciplinary/sustainable development
  • /social sciences/economics and business/economics/econometrics
  • /social sciences/economics and business/economics/macroeconomics
  • /social sciences/sociology/governance/crisis management
  • /social sciences/economics and business/economics/microeconomics

Call for proposal

H2020-MSCA-IF-2014
See other projects for this call

Funding Scheme

MSCA-IF-GF - Global Fellowships

Coordinator

UNIVERSITY OF CYPRUS
Address
1, Panepistimiou Avenue, 2109, Aglantzia
1678 Nicosia
Cyprus
Activity type
Higher or Secondary Education Establishments
EU contribution
€ 218 094,30

Partners (1)

THE TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA CORP
United States
Address
3451 Walnut Street Room P 221
19104 Philadelphia
Activity type
Higher or Secondary Education Establishments