Users without a subscription are not able to see the full content. Not logged in Downloadable! This page was processed by aws-apollo4 in 0.203 seconds, Using the URL or DOI link below will ensure access to this page indefinitely. Abstract. . Cherif, Reda and Hasanov, Fuad, Public Debt Dynamics: The Effects of Austerity, Inflation, and Growth Shocks (September 2012). The chapter looks at macroeconomic drivers of debt sustainability, notably GDP growth, as well as at structural drivers, in particular sector balance and dependency. In a weak economic environment, the likelihood of a self-defeating austerity shock is much higher than in normal times. A possible way out of this dilemma could be the following: one postulates a specific functional form of k depending on r, Note that we have shown in Proposition 6.1 that for values of r. For our parameter constellation, the debt ratio would have to exceed 300% by far in order to yield explosive debt ratio paths. Africa has not escaped from the economic crisis as the already gloomy public debt dynamics have been exacerbated by the pandemic. You could not be signed in, please check and try again. date: 31 October 2020. Covid-19 pandemic has triggered a meltdown of the global economy. Not affiliated Following a fiscal austerity shock, the debt ratio initially declines and then returns to its pre-shock path. To keep the model tractable, we do not provide a detailed micro-foundation of the endogenous response of interest costs to the dynamics of debt as Bhandari et al. If this decreasing effect on government expenditure is stronger than the loss in tax revenues than the primary deficit improves. Suggested Citation, 700 19th Street, N.W.Washington, DC 20431United States, International Monetary Fund (IMF) Research Paper Series, Subscribe to this free journal for more curated articles on this topic, Macroeconomics: Monetary & Fiscal Policies eJournal, Subscribe to this fee journal for more curated articles on this topic, Public Economics: National Budget, Deficit, & Debt eJournal, We use cookies to help provide and enhance our service and tailor content.By continuing, you agree to the use of cookies. We study how macroeconomic shocks affect U.S. public debt dynamics using a VAR with debt feedback. All Rights Reserved. Following a fiscal austerity shock, the debt ratio initially declines and then returns to its pre-shock path. In this chapter, we will address the last economic question resulting from the chosen model framework: how does public indebtedness evolve and how does fiscal policy and financial market interaction influence this evolution? More formally, the importance of the interest-rate-growth differential can be seen from the government budget identity,3 whereby the change in the net government debt-to-GDP ratio (d) is We will take ‘public debt per output’ (i.e. We study how macroeconomic shocks affect U.S. public debt dynamics using a VAR with debt feedback. The Power of Numeric Indicators and Probabilistic Reasoning about Public Debt, 17 Still the ‘Old’ Europe? contact us Thus, the main purpose in this chapter is to analyze the model dynamics of the debt ratio, especially with regard to the underlying parameters and variables characterizing fiscal policy and financial market behavior. To troubleshoot, please check our The United Nations Conference on Trade and Development (UNCTAD) has therefore called for a US$2.5 trillion coronavirus crisis package for developing countries[1] while […] The Power of Numeric Indicators and Probabilistic Reasoning about Public Debt, 17 Still the ‘Old’ Europe? (c) Copyright Oxford University Press, 2020. Government debt, also known as public interest, public debt, national debt and sovereign debt, contrasts to the annual government budget deficit, which is a flow variable that equals the difference between government receipts and spending in a single year. Download preview PDF. This paper analyzes the dynamics of public debt in a simple two-period overlapping-generations model of endogenous growth with productive public goods. debt ratio is projected to rise further until 2012, albeit at a slower pace that refl ects the recovery and some planned fi scal consolidation measures.
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