Sovereign Debt Sustainability and Central Bank Credibility

Tim Willems and Jeromin Zettelmeyer

No 2022/016, IMF Working Papers from International Monetary Fund

Abstract: This article surveys the literature on sovereign debt sustainability from its origins in the mid-1980s to the present, focusing on four debates. First, the shift from an “accounting based” view of debt sustainability, evaluated using government borrowing rates, to a “model based” view which uses stochastic discount rates. Second, empirical tests focusing on the relationship between primary balances to debt. Third, debt sustainability in the presence of rollover risk. And fourth, whether government borrowing costs below rates of growth (“r

Keywords: sovereign debt; debt sustainability; fiscal policy; debt crises; fiscal-monetary interactions; central bank credibility; credibility of the central bank; market value; credibility function; marginal utility; Ponzi scheme; Debt sustainability; Fiscal stance; Debt financing; Debt sustainability analysis (search for similar items in EconPapers)
Pages: 28
Date: 2022-01-28
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (9)

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