On the changes in the sustainability of European external debt: what have we learned

Juan Cuestas, Luis Gil-Alana and Paulo Regis

No wp2014-3, Bank of Estonia Working Papers from Bank of Estonia

Abstract: In this paper we aim to analyse the level of sustainability of external debt and, more importantly, how it has changed for a number of European economies. Given the severity of the crisis since 2008, we argue that the path of external debt burdens may have changed since the start of the crisis, given the concerns about debt accumulation in most countries. We follow the advice of Bohn (2007) and analyse the reaction of present debt accumulation to past debt stock, incorporating the possibility of endogenously determined structural breaks in this reaction function. We find that structural breaks happen in most cases after 2008, highlighting the importance of the policy measures taken by most governments.

Keywords: external debt; sustainability; crisis (search for similar items in EconPapers)
JEL-codes: C22 E31 E32 (search for similar items in EconPapers)
Date: 2014-10-10, Revised 2014-10-10
New Economics Papers: this item is included in nep-mac
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