Hidden Debt Revelations

Sebastian Horn, David Mihaly, Philipp Nickol and Cesar Sosa-Padilla
Additional contact information
David Mihaly: Banco Mundial
Philipp Nickol: UDE-RGS

No 338, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

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, we establish 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. We use our novel data to numerically discipline a quantitative sovereign debt model with hidden debt accumulation and an endogenous monitoring decision that triggers revelations. Our model simulations show that hidden debt has adverse effects on default risk, debt-carrying capacity and asset prices. While overall welfare costs of hidden debt are large, only countries in comparatively strong financial positions benefit from greater debt transparency.

Keywords: hidden debt; sovereign debt; sovereign default (search for similar items in EconPapers)
JEL-codes: F34 G01 H63 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2024-09
New Economics Papers: this item is included in nep-ban and nep-opm
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Downloads: (external link)
https://rednie.eco.unc.edu.ar/files/DT/338.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:aoz:wpaper:338

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