A Stochastic Indicator for Sovereign Debt Sustainability - 10.1628/001522116X1473325697904 - Mohr Siebeck
Economics

Jasper Lukkezen, Hugo Rojas-Romagosa

A Stochastic Indicator for Sovereign Debt Sustainability

Section: Articles
FinanzArchiv (FA)

Volume 72 () / Issue 3, pp. 229-267 (39)

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We propose a stochastic indicator to assess government debt sustainability. This indicator combines the effect of economic uncertainty – represented by stochastic simulations of interest and growth rates – with the expected fiscal response, which provides information on the long-term country-specific attitude towards fiscal sustainability. We apply our framework to postwar data for nine OECD countries and find that our indicator – the potential increase in debt in bad states of the world – distinguishes countries that have sustainability concerns (Italy, Spain, Portugal, and Iceland) from those that do not (the United States, the United Kingdom, the Netherlands, Belgium, and Germany).
Authors/Editors

Jasper Lukkezen No current data available.

Hugo Rojas-Romagosa No current data available.