Hidden debt revelations

Sebastian Horn, David Mihalyi, Philipp Nickol and César Sosa Padilla

No 1101, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: How reliable are public debt statistics? This paper quantifies the magnitude, characteristics, and timing of hidden debt by tracking ex post data revisions across a comprehensive new database of more than 50 vintages of World Bank debt statistics. In a sample of debt data covering 146 countries and 53 years, the paper establishes three new stylized facts: (i) debt statistics are systematically under-reported; (ii) hidden debt accumulates in boom years and tends to be revealed in bad times, often during IMF programs and sovereign defaults; and (iii) in debt restructurings, higher hidden debt is associated with larger creditor losses. The novel data is used to numerically discipline a quantitative sovereign debt model with hidden debt accumulation and an endogenous monitoring decision that triggers revelations. Model simulations show that hidden debt has adverse effects on default risk, debt-carrying capacity and asset prices and is therefore welfare detrimental.

Keywords: Hidden debt; sovereign debt; default (search for similar items in EconPapers)
JEL-codes: F34 G01 H63 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-opm
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https://www.econstor.eu/bitstream/10419/306833/1/1909349356.pdf (application/pdf)

Related works:
Working Paper: Hidden Debt Revelations (2024)
Working Paper: Hidden Debt Revelations (2024)
Working Paper: Hidden Debt Revelations (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:306833

DOI: 10.4419/96973279

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