IDEAS home Printed from https://ideas.repec.org/a/eee/deveco/v146y2020ics0304387820300705.html
   My bibliography  Save this article

A Framework to Assess Debt Sustainability under the Belt and Road Initiative

Author

Listed:
  • Bandiera, Luca
  • Tsiropoulos, Vasileios

Abstract

This paper proposes a framework to assess the impact of infrastructure investment expected under the Belt and Road Initiative (BRI) on the debt vulnerabilities of countries located on BRI transport and connectivity corridors. In the absence of comprehensive data on investments and financing terms, key assumptions have been made to estimate: i) the amounts and terms of public and publicly guaranteed (PPG) debt financing for BRI investment, ii) size and sectoral type of identified BRI investment, and iii) expected growth impact. BRI debt financing is expected to significantly increase PPG debt in several countries. The paper assesses the debt vulnerability from BRI investment in the medium term. In the medium term, defined as the period 2019–2023, debt financing of BRI investment is expected to be fully disbursed while the full growth impact of BRI related infrastructure is not entirely realized. In this initial phase, more than 50 percent of assessed BRI-recipient countries are estimated to face elevated debt vulnerabilities post-BRI, if BRI has only a limited impact on overall growth. Most of these countries have already high debt vulnerabilities before BRI investment.

Suggested Citation

  • Bandiera, Luca & Tsiropoulos, Vasileios, 2020. "A Framework to Assess Debt Sustainability under the Belt and Road Initiative," Journal of Development Economics, Elsevier, vol. 146(C).
    • Handle: RePEc:eee:deveco:v:146:y:2020:i:c:s0304387820300705
    DOI: 10.1016/j.jdeveco.2020.102495
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304387820300705
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jdeveco.2020.102495?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chang, Roberto & Kaltani, Linda & Loayza, Norman V., 2009. "Openness can be good for growth: The role of policy complementarities," Journal of Development Economics, Elsevier, vol. 90(1), pages 33-49, September.
    2. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    3. Romain Wacziarg & Karen Horn Welch, 2008. "Trade Liberalization and Growth: New Evidence," The World Bank Economic Review, World Bank, vol. 22(2), pages 187-231, June.
    4. Arvind Panagariya, 2004. "Miracles and Debacles: In Defence of Trade Openness," The World Economy, Wiley Blackwell, vol. 27(8), pages 1149-1171, August.
    5. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 879-907.
    6. William Easterly & Luis Servén, 2003. "The Limits of Stabilization : Infrastructure, Public Deficits, and Growth in Latin America," World Bank Publications - Books, The World Bank Group, number 14456.
    7. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    8. Pritchett, Lant, 1996. "Mind your P's and Q's : the cost of public investment is not the value of public capital," Policy Research Working Paper Series 1660, The World Bank.
    9. Robert J. Barro & Xavier Sala-I-Martin, 1992. "Public Finance in Models of Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(4), pages 645-661.
    10. César Calderón & Enrique Moral‐Benito & Luis Servén, 2015. "Is infrastructure capital productive? A dynamic heterogeneous approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 30(2), pages 177-198, March.
    11. Philip Keefer & Stephen Knack, 2007. "Boondoggles, Rent-Seeking, and Political Checks and Balances: Public Investment under Unaccountable Governments," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 566-572, August.
    12. Greenaway, David & Morgan, Wyn & Wright, Peter W, 1998. "Trade Reform, Adjustment and Growth: What Does the Evidence Tell Us?," Economic Journal, Royal Economic Society, vol. 108(450), pages 1547-1561, September.
    13. Bolaky, Bineswaree & Freund, Caroline, 2004. "Trade, regulations, and growth," Policy Research Working Paper Series 3255, The World Bank.
    14. Pedro R.D. Bom & Jenny E. Ligthart, 2014. "What Have We Learned From Three Decades Of Research On The Productivity Of Public Capital?," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 889-916, December.
    15. Devadas,Sharmila & Pennings,Steven Michael, 2018. "Assessing the Effect of Public Capital on Growth : An Extension of the World Bank Long-Term Growth Model," Policy Research Working Paper Series 8604, The World Bank.
    16. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rao, B. Bhaskara & Vadlamannati, Krishna Chaitanya, 2011. "Globalization and growth in the low income African countries with the extreme bounds analysis," Economic Modelling, Elsevier, vol. 28(3), pages 795-805, May.
    2. Marilyne Huchet†Bourdon & Chantal Le Mouël & Mariana Vijil, 2018. "The relationship between trade openness and economic growth: Some new insights on the openness measurement issue," The World Economy, Wiley Blackwell, vol. 41(1), pages 59-76, January.
    3. Chang, Roberto & Kaltani, Linda & Loayza, Norman V., 2009. "Openness can be good for growth: The role of policy complementarities," Journal of Development Economics, Elsevier, vol. 90(1), pages 33-49, September.
    4. Charles Ackah, & Oliver Morrissey, 2007. "Trade Liberalisation is Good for You if You are Rich," Discussion Papers 07/01, University of Nottingham, CREDIT.
    5. Dithmer, Jan & Abdulai, Awudu, 2017. "Does trade openness contribute to food security? A dynamic panel analysis," Food Policy, Elsevier, vol. 69(C), pages 218-230.
    6. Jonathan E. Ogbuabor & Onyinye I. Anthony-Orji & Oliver E. Ogbonna & Anthony Orji, 2019. "Regional integration and growth: New empirical evidence from WAEMU," Progress in Development Studies, , vol. 19(2), pages 123-143, April.
    7. Iyke Bernard Njindan, 2017. "Does Trade Openness Matter for Economic Growth in the CEE Countries?," Review of Economic Perspectives, Sciendo, vol. 17(1), pages 3-24, March.
    8. Sèna Kimm Gnangnon, 2021. "Services diversification and economic growth," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 18(1), pages 49-86, June.
    9. Ho Thuy Ai & Ping, Lin, 2018. "Impacts of fiscal policy on economic growth: Another look from institutional perspective," Economics Discussion Papers 2018-45, Kiel Institute for the World Economy (IfW Kiel).
    10. Urrunaga, Roberto & Aparicio, Carlos, 2012. "Infrastructure and economic growth in Peru," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    11. Donatella Gatti & Christophe Rault & Anne-Gael Vaubourg, 2012. "Unemployment and finance: how do financial and labour market factors interact?," Oxford Economic Papers, Oxford University Press, vol. 64(3), pages 464-489, July.
    12. Elisabetta Lodigiani & Sara Salomone, 2015. "Migration-induced Transfers of Norms. Political Empowerment?The case of Female Political Empowerment," Working Papers 2015:19, Department of Economics, University of Venice "Ca' Foscari".
    13. Kose,Ayhan & Ohnsorge,Franziska Lieselotte & Ye,Lei Sandy & Islamaj,Ergys, 2017. "Weakness in investment growth : causes, implications and policy responses," Policy Research Working Paper Series 7990, The World Bank.
    14. Elisabetta LODIGIANI & Sara SALOMONE, 2020. "Migration-induced transfers of norms: the case of female political empowerment," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 86(4), pages 435-477, December.
    15. Grigoli, Francesco & Mills, Zachary, 2011. "Do high and volatile levels of public investment suggest misconduct ? the role of institutional quality," Policy Research Working Paper Series 5735, The World Bank.
    16. Dong, Xiao-yuan & Pandey, Manish, 2012. "Gender and labor retrenchment in Chinese state owned enterprises: Investigation using firm-level panel data," China Economic Review, Elsevier, vol. 23(2), pages 385-395.
    17. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    18. Felbermayr, Gabriel & Gröschl, Jasmin, 2014. "Naturally negative: The growth effects of natural disasters," Journal of Development Economics, Elsevier, vol. 111(C), pages 92-106.
    19. Sèna Kimm Gnangnon, 2023. "Do unilateral trade preferences help reduce poverty in beneficiary countries?," International Journal of Economic Policy Studies, Springer, vol. 17(1), pages 249-288, February.
    20. Gokcen Yilmaz, 2018. "Composition of public investment and economic growth: evidence from Turkish provinces, 1975-2001," Public Sector Economics, Institute of Public Finance, vol. 42(2), pages 187-214.

    More about this item

    Keywords

    Fiscal sustainability; Fiscal risks; Contingent liabilities; Investment and growth;
    All these keywords.

    JEL classification:

    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:146:y:2020:i:c:s0304387820300705. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/devec .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.