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The Sustainability of European External Debt: What have We Learned?

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  • Juan Carlos Cuestas
  • Luis A. Gil-Alana
  • Paulo José Regis

Abstract

In this paper we aim to analyze the level of sustainability of external debt and, more importantly, how it has changed for a number of European economies. Given the severity of the crisis since 2008, we argue that the path of external debt burdens may have changed since the start of the crisis, given the concerns about debt accumulation in most countries. We analyze the reaction of present debt accumulation to past debt stock, incorporating the possibility of endogenously determined structural breaks in this reaction function. We find that structural breaks happen in most cases after 2008, highlighting the importance of the policy measures taken by most governments.

Suggested Citation

  • Juan Carlos Cuestas & Luis A. Gil-Alana & Paulo José Regis, 2015. "The Sustainability of European External Debt: What have We Learned?," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 445-468, August.
  • Handle: RePEc:bla:reviec:v:23:y:2015:i:3:p:445-468
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    File URL: http://hdl.handle.net/10.1111/roie.12175
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    References listed on IDEAS

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    1. Pittaluga, Giovanni B. & Seghezza, Elena, 2016. "How Japan remained on the Gold Standard despite unsustainable external debt," Explorations in Economic History, Elsevier, vol. 59(C), pages 40-54.

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