An extended Debt Sustainability Analysis framework for Latin American economies

Iván Kataryniuk, Raquel Lorenzo Alonso, Enrique Martínez Casillas and Jacopo Timini
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Raquel Lorenzo Alonso: Banco de España
Enrique Martínez Casillas: Banco de España

No 2412, Occasional Papers from Banco de España

Abstract: The COVID-19 pandemic marked a watershed for public finances in Latin America and around the world. Fiscal measures adopted in 2020 to cope with the health emergency were substantial and affected debt dynamics. While the situation partially reverted in the following years, public debt is still higher than its recent historical average for most countries in the region. In this context, the sustainability of public debt dynamics has taken on renewed importance. In this paper, we extend a standard Debt Sustainability Analysis (DSA) framework that considers significant features of Latin American economies – such as the existence of foreign currency denominated debt – by introducing an economic model that jointly determines future values of key macroeconomic variables. We then compute different scenarios for Brazil, Chile, Colombia, Mexico, and Peru, illustrating how fiscal and structural policy changes affect the dynamics of public debt.

Keywords: public debt; fiscal rules; structural reforms; Debt Sustainability Analysis (DSA); Latin America (search for similar items in EconPapers)
JEL-codes: E62 H63 H68 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2024-05
New Economics Papers: this item is included in nep-lam and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:bde:opaper:2412e

DOI: 10.53479/36539

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