Lost and Found: Market Access and Public Debt Dynamics
Antonio Bassanetti (),
Carlo Cottarelli () and
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Antonio Bassanetti: International Monetary Fund, Bank of Italy
Carlo Cottarelli: International Monetary Fund
No 2016/5, SEP Working Papers from LUISS School of European Political Economy
The empirical literature on sovereign debt crises identifies the level of public debt (measured as a share of GDP) as a key variable to predict debt defaults and to determine sovereign market access. This evidence has led to the widespread use of (country-specific) debt thresholds to assess debt sustainability. We argue that the level of the debt-to-GDP ratio, whose use is justified on a theoretical and empirical ground, should not be the only fiscal metric to assess the complex relationship between public debt and debt defaults/market access. In particular, we show that, in a large panel of emerging markets, the dynamics of the debt ratio plays a critical role for market access. In particular, given a certain level of debt, a steadily declining debt ratio is associated with a lower probability of debt distress/market loss and with a higher likelihood of market re-access once access had been lost.
Keywords: Debt Sustainability; Fiscal Crises; Default; Market Access; International Capital Markets (search for similar items in EconPapers)
JEL-codes: F34 G15 H62 H63 (search for similar items in EconPapers)
Pages: 34 pages
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Journal Article: Lost and found: market access and public debt dynamics (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:sepewp:2016_005
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