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Empirical assessment of sustainability and feasibility of government debt: The Philippines case

  • Qin, Duo
  • Cagas, Marie Anne
  • Ducanes, Geoffrey
  • Magtibay-Ramos, Nedelyn
  • Quising, Pilipinas

This paper develops empirical methods of assessing the sustainability and feasibility of public debt using the No Ponzi Game criterion, using the Philippines as the testing case. Both historical data and forecasts generated by a quarterly macro-econometric model are used in the assessment. Stochastic simulations are carried out to mimic future uncertainty. The test results show that, up to the end of the present administration in 2010, the Philippine government debt is not sustainable but weakly feasible, that the feasibility is vulnerable to major adverse shocks, and that simple budgetary deficit control policy is inadequate for achieving debt sustainability or strengthening feasibility.

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Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 17 (2006)
Issue (Month): 1 (February)
Pages: 63-84

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Handle: RePEc:eee:asieco:v:17:y:2006:i:1:p:63-84
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  1. Nigel Andrew Chalk & Richard Hemming, 2000. "Assessing Fiscal Sustainability in Theory and Practice," IMF Working Papers 00/81, International Monetary Fund.
  2. O'Connell, Stephen A & Zeldes, Stephen P, 1988. "Rational Ponzi Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(3), pages 431-50, August.
  3. Olivier J. Blanchard & Philippe Weil, 2001. "Dynamic Efficiency, the Riskless Rate, and Debt Ponzi Games under Uncertainty," Sciences Po publications info:hdl:2441/8607, Sciences Po.
  4. Hendry, David F, 2002. " Applied Econometrics without Sinning," Journal of Economic Surveys, Wiley Blackwell, vol. 16(4), pages 591-604, September.
  5. Bohn, Henning, 1995. "The Sustainability of Budget Deficits in a Stochastic Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 257-71, February.
  6. Alejandro Izquierdo & Ernesto Talvi & Guillermo A. Calvo, 2002. "Sudden Stops, the Real Exchange Rate and Fiscal Sustainability: Argentina's Lessons," Research Department Publications 4299, Inter-American Development Bank, Research Department.
  7. Michael Bergman, 2001. "Testing government solvency and the No Ponzi Game condition," Applied Economics Letters, Taylor & Francis Journals, vol. 8(1), pages 27-29.
  8. Emmanuel S. de Dios, et al, 2004. "The Deepening Crisis : The Real Score on Deficits and the Public Debt," UP School of Economics Discussion Papers 200409, University of the Philippines School of Economics.
  9. Hakkio, Craig S & Rush, Mark, 1991. "Is the Budget Deficit "Too Large?"," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 429-45, July.
  10. David E. Lebow, 2004. "Recent fiscal policy in selected industrial countries," BIS Working Papers 162, Bank for International Settlements.
  11. Montiel, Peter J., 1993. "Fiscal aspects of developing countrydebt problems and debt and debt-service reduction operations : a conceptual framework," Policy Research Working Paper Series 1073, The World Bank.
  12. Assaf Razin & Efraim Sadka, 2002. "A Brazilian Debt-Crisis Model," NBER Working Papers 9211, National Bureau of Economic Research, Inc.
  13. Quintos, Carmela E, 1995. "Sustainability of the Deficit Process with Structural Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 409-17, October.
  14. Barbie, Martin & Hagedorn, Marcus & Kaul, Ashok, 2001. "Government Debt as Insurance against Macroeconomic Risk," IZA Discussion Papers 412, Institute for the Study of Labor (IZA).
  15. Henning Bohn, 1998. "The Behavior of U. S. Public Debt and Deficits," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 949-963.
  16. Cagas, Marie Anne & Ducanes, Geoffrey & Magtibay-Ramos, Nedelyn & Qin, Duo & Quising, Pilipinas, 2006. "A small macroeconometric model of the Philippine economy," Economic Modelling, Elsevier, vol. 23(1), pages 45-55, January.
  17. Desiree A. Desierto & Geoffrey M. Ducanes, 2013. "Philippines," Chapters, in: Asia Rising, chapter 13, pages 385-407 Edward Elgar.
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