Debt explosions and reductions in emerging and developing countries: drivers and implications

Ugo Panizza and Andrew Powell

Chapter 2 in Fiscal Policy in a Turbulent Era, 2024, pp 22-38 from Edward Elgar Publishing

Abstract: This chapter starts by comparing the evolution of public debt in emerging and developing (EMDEs) and advanced economies. It then focuses on EMDEs and provides a detailed analysis of the drivers of increases and the decreases in public debt. Most debt reduction episodes are driven by inflation and associated negative real interest rates and a smaller share are driven by real GDP growth and primary surpluses. Debt explosions are instead driven by the stock flow reconciliation, which in turn is often associated with currency depreciation and foreign currency debt. Large primary deficits are also an important driver of debt explosions while high interest rates are less important. The pattern of asymmetric drivers of debt explosions and debt reduction episodes indicates that a continued focus on improving fiscal institutions to promote true fiscal counter-cyclicality remains relevant and that that better monitoring of currency mismatches and the determinants of below-the-line items is required.

Keywords: Economics and Finance; Politics and Public Policy (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/doi/10.4337/9781035300563.00011 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Temporarily Unavailable

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:elg:eechap:21915_2

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Darrel McCalla ().