External Debt Sustainability and Domestic Debt in Heavily Indebted Poor Countries
Marco Arnone and
Rivista Internazionale di Scienze Sociali, 2007, vol. 115, issue 2, 187-213
In this paper we broaden the standard debt sustainability framework used in the IMF-WB Heavily Indebted Poor Countries (HIPC) Initiative to include the analysis of domestic public debt and other feedback effects into the usual debt sustainability analysis (DSA). The latter does not take into account the fully-fledged government budget constraint and the feedback effects of the fiscal and monetary adjustment required by multilateral programs. This work focuses on the evaluation of total public debt sustainability in a simple accounting framework that includes exchange rate effects. We use new data on domestic public debt and show how the switch from foreign to domestic borrowing, and rising domestic real interest rates are likely to undermine the overall sustainability and the success of debt relief programs.
Keywords: Debt Sustainability; Domestic Debt; HIPC (search for similar items in EconPapers)
JEL-codes: F34 H63 O19 (search for similar items in EconPapers)
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Working Paper: External debt sustainability and domestic debt in Heavily Indebted Poor Countries (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:vep:journl:y:2007:v:115:i:2:p:187-213
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