Public Debt Frontier: A Python Toolkit for Analyzing Public Debt Sustainability

Gonzalo F. de-Córdoba, Benedetto Molinari and Jose Torres ()
Additional contact information
Gonzalo F. de-Córdoba: Department of Economic Theory and History, Universidad de Málaga, 29016 Málaga, Spain

Sustainability, 2021, vol. 13, issue 23, 1-25

Abstract: This study proposes a synthetic visual indicator with which to perform debt sustainability analysis using dynamic general equilibrium models. In a single diagram, we summarized the general equilibrium relationships among economic activity, government budget, and the maximum amount of sustainable public debt. Then, we measured sustainability using the distance of actual debt from the model-consistent maximum debt. This indicator can be implemented with any DSGE model; as a backing theory, we used a neoclassical model augmented with endogenous tax revenues, disaggregated public spending, different production technologies for public and private goods, non-atomistic wage setters in public labor (unions), and a fully specified maturity curve for public bonds. We provided an example of its usage using the case of Greece during the last public debt crisis. To perform the numerical analysis, we developed original software, whose advantage is allowing an audience without expertise in DSGE models to perform general equilibrium debt sustainability analyses without requiring an understanding of the technicalities of DSGE models.

Keywords: debt sustainability analysis; fiscal policy; endogenous tax revenues; debt-dependent government spending; DSGE models; standalone software; Python (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/13/23/13260/pdf (application/pdf)
https://www.mdpi.com/2071-1050/13/23/13260/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:13:y:2021:i:23:p:13260-:d:691863

Access Statistics for this article

Sustainability is currently edited by Ms. Elaine Li

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().