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Debt Sustainability Assessment: The IMF Approach and Alternatives

Charles Wyplosz ()

No 03-2007, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: Debt sustainability is an essential attribute of good macroeconomic policies but its precise definition is elusive and its assessment is even more challenging. The IMF has developed a sophisticated approach but it must be recognized that, because the future is unknown, any debt sustainability assessment is only valid within the bounds of the underlying guesses. There is no support for the view that added complexity allows for more precise assessments. As a consequence, policy conclusions drawn from debts sustainability exercises must be considered with care. Sacrificing growth – in the short and even in the long run – to imprecisely known risks can be very costly.

Keywords: International Economics; Exchange Rates; External debt (search for similar items in EconPapers)
JEL-codes: F33 F36 (search for similar items in EconPapers)
Pages: 35
Date: 2007
New Economics Papers: this item is included in nep-cba
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