Assessing the Growth-Enhancing Effect of State Contingent Debt Instruments

Sarah Nandnaba () and Rangan Gupta
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Sarah Nandnaba: Department of Economics, Ecole normale superieure (ENS) Paris-Saclay, 91190 Gif-sur-Yvette, France

No 202426, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper assesses the growth-enhancing effect of State Contingent Debt Instruments (SCDIs) and uses a panel data set of 7 countries from 1991 to 2021. Exploring this relationship empirically for the first time contributes to understanding SCDIs' impact on debt management and growth promotion. SCDIs' present value exerts a pro-cyclical effect and alleviates the debt burden, significantly promoting Gross Domestic Product (GDP) growth and improving fiscal balance. The share of SCDIs on external debt shows a positive and significant impact on economic growth, suggesting that linking the principal to economic performance can enhance growth. The decrease in SCDIs' present value increases the fiscal surplus, implying that SCDIs contribute to improving fiscal balance.

Keywords: State Contingent Debt Instruments; Fiscal Balance; Present Value; Public debt; Debt burden (search for similar items in EconPapers)
JEL-codes: C23 C26 E44 E62 F34 H6 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2024-06
New Economics Papers: this item is included in nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202426

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