Debt sustainability is an essential attribute of good macroeconomic policies but its precise definition is elusive and its assessment is even more challenging. The IMF has developed a sophisticated approach but it must be recognized that, because the future is unknown, any debt sustainability assessment is only valid within the bounds of the underlying guesses. There is no support for the view that added complexity allows for more precise assessments. As a consequence, policy conclusions drawn from debts sustainability exercises must be considered with care. Sacrificing growth – in the short and even in the long run – to imprecisely known risks can be very costly.
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Paper provided by Economics Section, The Graduate Institute of International Studies in its series HEI Working Papers with number
03-2007.
Length: 35 Date of creation: 19 Oct 2005 Date of revision:
30 Jan 2006 Publication status: Forthcoming in book not yet determined Handle: RePEc:gii:giihei:heiwp03-2007
Find related papers by JEL classification: F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
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