Working Paper: NBER ID: w8939
Authors: Sebastian Edwards
Abstract: In this paper I analyze the relationship between fiscal policy, aggregate public sector debt sustainability, and debt relief. I develop a methodology to compute the fiscal policy path that is compatible with aggregate debt sustainability in the post-HIPC era. The model explicitly considers the role of domestic debt, and quantifies the extent to which future debt sustainability depends on the availability of concessional loans at subsidized interest rates. The working of the model is illustrated for the case of Nicaragua, a country that in 2002 had one of the highest net present value of public external debt to GDP ratios.
Keywords: No keywords provided
JEL Codes: F3; F34; F35
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Availability of concessional loans (H81) | Fiscal policy adjustments (E62) |
| Fiscal policy adjustments (E62) | Public sector debt sustainability (H63) |
| Availability of concessional loans (H81) | Public sector debt sustainability (H63) |
| Fiscal policy adjustments (E62) | Social expenditures (H53) |
| Fiscal policy adjustments (E62) | Political instability (O17) |