Jasper Lukkezen, Hugo Rojas-Romagosa

A Stochastic Indicator for Sovereign Debt Sustainability

Section: Articles
FinanzArchiv (FA)

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

39,00 € including VAT
article PDF
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).

Jasper Lukkezen No current data available.

Hugo Rojas-Romagosa No current data available.