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A Stochastic Framework for Public Debt Sustainability Analysis

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  • Gabriel Di Bella

Abstract

This paper proposes a framework for public debt sustainability analysis (DSA) that is complementary to that generally used by IFIs. The DSA in this paper has three components: (i) an integrated and consistent accounting framework for the Consolidated Public Sector (CPS); (ii) the estimation of an appropriate, and country-specific debt threshold, following the approach proposed by Reinhart, Rogoff and Savastano (2003); and (iii) a method for the calculation of the CPS primary balance to achieve the desired debt targets, without resorting to ad-hoc assumptions for the values of the macroeconomic variables during the planning horizon, in the spirit of Garcia and Rigobon (2004) and Celasun, Debrun and Ostry (2006). The paper uses this approach to analyze the sustainability of the Dominican Republic's Public Debt.

Suggested Citation

  • Gabriel Di Bella, 2008. "A Stochastic Framework for Public Debt Sustainability Analysis," IMF Working Papers 08/58, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/58
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
    2. Oya Celasun & Xavier Debrun & Jonathan D. Ostry, 2006. "Primary Surplus Behavior and Risks to Fiscal Sustainability in Emerging Market Countries: A "Fan-Chart" Approach," IMF Staff Papers, Palgrave Macmillan, vol. 53(3), pages 1-3.
    3. Philippe D Karam & Douglas Hostland, 2005. "Assessing Debt Sustainability in Emerging Market Economies Using Stochastic Simulation Methods," IMF Working Papers 05/226, International Monetary Fund.
    4. Marcio Garcia & Roberto Rigobon, 2004. "A Risk Management Approach to Emerging Market's Sovereign Debt Sustainability with an Application to Brazilian Data," NBER Working Papers 10336, National Bureau of Economic Research, Inc.
    5. Roberto Rigobon & Marcio Garcia, 2004. "A Risk Management Approach to Emerging Market’s Sovereign Debt Sustainability with an application to Brazilian data," Econometric Society 2004 Latin American Meetings 24, Econometric Society.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Petia Topalova & Dan Nyberg, 2010. "What Level of Public Debt Could India Target?," IMF Working Papers 10/7, International Monetary Fund.
    2. International Monetary Fund, 2010. "Guyana; Selected Issues," IMF Staff Country Reports 10/293, International Monetary Fund.
    3. Magnus Saxegaard, 2014. "Safe Debt and Uncertainty in Emerging Markets; An Application to South Africa," IMF Working Papers 14/231, International Monetary Fund.
    4. Baghdassarian, William & Mele, Gianluca & Pradelli, Juan, 2014. "Assessing public debt sustainability in Mauritania with a stochastic framework," Policy Research Working Paper Series 7088, The World Bank.
    5. repec:lje:journl:v:22:y:2017:i:sp:p:25-51 is not listed on IDEAS

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