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Debt Ceiling and External Debt Sustainability in Romania: A Quantile Autoregression Model

Author

Listed:
  • Boengiu, Tudor

    () (Academy of Economic Studies)

  • Morar Triandafil, Cristina

    () (University of Finance and Banking)

  • Morar Triandafil, Adrian

    () (Romanian Academy)

Abstract

In this paper we investigate the external debt sustainability using a quantile autoregression (QAR) model. QAR is a new type of econometric models used to separate periods of nonstationarity from the stationarity ones. This kind of model allows us to identify various trajectories of external debt that are compatible with indebtness sustainability. We use such trajectories to construct a debt ceiling, that is, the largest value of external debt that does not jeopardize long-run indebtness sustainability. We make out-of-sample forecast of such a ceiling and we present the debt ceiling as a “debt-warning system” which could be used by policy makers interested in keeping the external debt on a sustainable path. We illustrate the applicability of such econometric tool using Romanian data. Also, we used the R programming language for part of our statistical computing and graphics presented in this study.

Suggested Citation

  • Boengiu, Tudor & Morar Triandafil, Cristina & Morar Triandafil, Adrian, 2011. "Debt Ceiling and External Debt Sustainability in Romania: A Quantile Autoregression Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 15-29, December.
  • Handle: RePEc:rjr:romjef:v::y:2011:i:4:p:15-29
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    References listed on IDEAS

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    1. Koenker, Roger & Xiao, Zhijie, 2006. "Quantile Autoregression," Journal of the American Statistical Association, American Statistical Association, vol. 101, pages 980-990, September.
    2. Lima, Luiz Renato Regis de Oliveira & Sampaio, Raquel Menezes Bezerra, 2005. "The asymmetric behavior of the U.S. public debt," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 593, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    3. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731, April.
    4. Roger Koenker & Zhijie Xiao, 2004. "Unit Root Quantile Autoregression Inference," Journal of the American Statistical Association, American Statistical Association, vol. 99, pages 775-787, January.
    5. repec:blg:journl:v:13:y:2018:i:1:p:90-96 is not listed on IDEAS
    6. Hansen, Bruce E., 1995. "Rethinking the Univariate Approach to Unit Root Testing: Using Covariates to Increase Power," Econometric Theory, Cambridge University Press, vol. 11(05), pages 1148-1171, October.
    7. Efstathios Paparoditis & Dimitris N. Politis, 2003. "Residual-Based Block Bootstrap for Unit Root Testing," Econometrica, Econometric Society, vol. 71(3), pages 813-855, May.
    8. Uctum, Merih & Wickens, Michael, 2000. " Debt and Deficit Ceilings, and Sustainability of Fiscal Policies: An Intertemporal Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(2), pages 197-222, May.
    9. Lima, Luiz Renato & Gaglianone, Wagner Piazza & Sampaio, Raquel M.B., 2008. "Debt ceiling and fiscal sustainability in Brazil: A quantile autoregression approach," Journal of Development Economics, Elsevier, vol. 86(2), pages 313-335, June.
    10. Roger Koenker & Zhijie Xiao, 2002. "Inference on the Quantile Regression Process," Econometrica, Econometric Society, vol. 70(4), pages 1583-1612, July.
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    Citations

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    Cited by:

    1. M. Hakan Berument & N. Nergiz Dincer & Pinar Yasar, 2016. "Persistency of Turkish export shocks: a quantile autoregression (QAR) approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(3), pages 445-460, August.
    2. Mei-Yin Lin, 2014. "The Sustainability of External Debt in OECD Countries: Evidence from Quantile Autoregression," Research in World Economy, Research in World Economy, Sciedu Press, vol. 5(2), pages 31-42, September.

    More about this item

    Keywords

    external debt; quantile autoregression; local sustainability; global sustainability; gross domestic product;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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