IDEAS home Printed from https://ideas.repec.org/p/bis/bisblt/133.html

High public debt in the Americas: non-linear implications for risk premia and inflation expectations

Author

Listed:
  • Eduardo Amaral
  • Rafael Guerra
  • Alejandrina Salcedo
  • Pablo Tomasini
  • Christian Upper

Abstract

Public debt has reached multi-decade highs in the Americas. Additionally, public interest costs have generally increased over the past decade. High public debt and interest costs increase the sensitivity of risk premia to fiscal deficits – regardless of the exchange rate regime – and amplify the sensitivity of short-term inflation expectations to fluctuations in risk premia.Our analysis underscores the relevance of disciplined fiscal policies, which assume heightened significance in the context of current debt dynamics. On the monetary side, safeguarding central bank independence is crucial for ensuring macroeconomic stability.

Suggested Citation

  • Eduardo Amaral & Rafael Guerra & Alejandrina Salcedo & Pablo Tomasini & Christian Upper, 2026. "High public debt in the Americas: non-linear implications for risk premia and inflation expectations," BIS Bulletins 133, Bank for International Settlements.
    • Handle: RePEc:bis:bisblt:133
    as

    Download full text from publisher

    File URL: https://www.bis.org/publ/bisbull133.pdf
    File Function: Full PDF document
    Download Restriction: no
    File URL: https://www.bis.org/publ/bisbull133.htm
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Eichengreen, Barry & Menuet, Maxime & Donnat, Gregory, 2026. "From Stocks to Flows: Debt Service and Fiscal Sustainability," CEPR Discussion Papers 21723, Centre for Economic Policy Research.
    2. Wenxin Du & Jesse Schreger, 2016. "Local Currency Sovereign Risk," Journal of Finance, American Finance Association, vol. 71(3), pages 1027-1070, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hernández, Juan R., 2025. "Covered interest parity: A forecasting approach to estimate the neutral band," Economic Modelling, Elsevier, vol. 148(C).
    2. Eiji Fujii, 2024. "Currency concentration in sovereign debt, exchange rate cyclicality, and volatility in consumption," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(1), pages 169-192, February.
    3. Mohamed Bouabidi, 2023. "The surge in Tunisia foreign debt: causes and possible ways out," SN Business & Economics, Springer, vol. 3(3), pages 1-23, March.
    4. Gopinath, Gita & Meyer, Josefin & Reinhart, Carmen M. & Trebesch, Christoph, 2025. "Sovereign vs. corporate debt and default: More similar than you think," Journal of International Economics, Elsevier, vol. 155(C).
    5. Masaru Tsuruta, 2024. "Interaction between Sovereign Quanto Credit Default Swap Spreads and Currency Options," JRFM, MDPI, vol. 17(2), pages 1-33, February.
    6. Janus, Jakub, 2021. "The COVID-19 shock and long-term interest rates in emerging market economies," Finance Research Letters, Elsevier, vol. 43(C).
    7. Ricardo Sabbadini, 2017. "Overcoming the Original Sin: Gains from Local Currency External Debt," Working Papers, Department of Economics 2017_27, University of São Paulo (FEA-USP).
    8. Borri, Nicola, 2018. "Local currency systemic risk," Emerging Markets Review, Elsevier, vol. 34(C), pages 111-123.
    9. Galvez, Julio & Gambacorta, Leonardo & Mayordomo, Sergio & Serena, Jose Maria, 2021. "Dollar borrowing, firm credit risk, and FX-hedged funding opportunities," Journal of Corporate Finance, Elsevier, vol. 68(C).
    10. Mulalo Mamburu, 2022. "Local-Currency sovereign risk on South African government bonds," ERSA Working Paper Series 20, Economic Research Southern Africa.
    11. Tomas Williams, 2018. "Capital Inflows, Sovereign Debt and Bank Lending: Micro-Evidence from an Emerging Market," The Review of Financial Studies, Society for Financial Studies, vol. 31(12), pages 4958-4994.
    12. Gomez-Gonzalez, Jose E. & Uribe, Jorge M. & Valencia, Oscar, 2024. "Sovereign Risk and Economic Complexity," IDB Publications (Working Papers) 13393, Inter-American Development Bank.
    13. Marco Flaccadoro & Stefania Villa, 2025. "Global risk aversion and the term premium gap in emerging market economies," Temi di discussione (Economic working papers) 1493, Bank of Italy, Economic Research and International Relations Area.
    14. Venkatesh, Hari & Hiremath, Gourishankar S., 2025. "Currency exposure and economic growth: Friend or foe?," International Economics, Elsevier, vol. 183(C).
    15. Gomez-Gonzalez, Jose E. & Uribe, Jorge M. & Valencia, Oscar M., 2025. "Asymmetric sovereign risk: Implications for climate change preparation," World Development, Elsevier, vol. 188(C).
    16. Aizenman, J. & Jinjarak, Y. & Park, D. & Zheng, H., 2021. "Good-bye original sin, hello risk on-off, financial fragility, and crises?," Journal of International Money and Finance, Elsevier, vol. 117(C).
    17. Josefin Meyer & Carmen M Reinhart & Christoph Trebesch, 2022. "Sovereign Bonds Since Waterloo," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(3), pages 1615-1680.
    18. Gegenfurtner, Dennis Andreas, 2021. "The causes of Original Sin: An empirical investigation of emerging market and developing countries," IPE Working Papers 174/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    19. Giovanni Bonfanti & Juri Marcucci, 2026. "A European safe asset? Not without the investors," Questioni di Economia e Finanza (Occasional Papers) 1010, Bank of Italy, Economic Research and International Relations Area.
    20. Augustin, Patrick & Chernov, Mikhail & Song, Dongho, 2018. "Sovereign credit risk and exchange rates: Evidence from CDS quanto spreads," CEPR Discussion Papers 12857, Centre for Economic Policy Research.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bis:bisblt:133. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin Fessler (email available below). General contact details of provider: https://edirc.repec.org/data/bisssch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.