High rates of domestic inflation impact the credit scoring model of sovereign country risk exposure through which of the following variables?

Question

Quizplus · Accepted Answer

Domestic money supply growth is directly affected by high rates of domestic inflation. This increase in money supply may lead to a decrease in the value of a country's currency, making it harder for the country to service its foreign debt obligations and increasing the risk exposure of investors in that country. The other variables listed may also be impacted by domestic inflation, but not as directly as the domestic money supply growth.

High Rates of Domestic Inflation Impact the Credit Scoring Model