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Lost and Found: Market Access and Public Debt Dynamics
Author: Mr. Carlo Cottarelli, Mr. Andrea F Presbiterohttps://orcid.org/0000-0003-4622-941X, and Antonio Bassanettihttps://orcid.org/0000-0003-3709-3282
Series:
IMF Working Papers
Volume/Issue:
Volume 2016: Issue 253
Language:
English
Publication Date:
23 Dec 2016
DOI:
https://doi.org/10.5089/9781475563207.001
ISBN:
9781475563207
ISSN:
1018-5941
Pages:
34
Keywords:
WP; market; debt ratio; market access; debt distress; Debt Sustainability; Fiscal Crises; Default; International Capital Markets; debt dynamics; distress episode; market loss; Debt sustainability analysis; Fiscal stance; Debt default; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund