How to Assess Country Risk
Publication Date:
May 7, 2021
Electronic Access:
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Disclaimer: This Technical Guidance Note should not be reported as representing the views of the IMF. The views expressed in this Note are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Summary:
The IMF’s Vulnerability Exercise (VE) is a cross-country exercise that identifies country-specific near-term macroeconomic risks. As a key element of the Fund’s broader risk architecture, the VE is a bottom-up, multi-sectoral approach to risk assessments for all IMF member countries. Assessments reflect the judgement of country teams informed by consistent, cross-country quantitative models as well as country-specific context. The VE modeling toolkit is regularly updated in response to global economic developments and the latest modeling innovations. The new generation of VE models presented here leverages machine-learning (ML) algorithms. The performance of machine-learning-based models is evaluated against more conventional models in a horse-race format. The paper also presents direct, transparent methods for communicating model results.
