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Persistence of the Sovereign Debt Components and Debt Sustainability: Some Evidence for the US and Europe

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  • Guglielmo Maria Caporale
  • Miguel A. Martin-Valmayor
  • Luis A. Gil-Alana
  • Nieves Carmona-González

Abstract

This paper analyses the persistence and mean reversion properties of sovereign debt and its components by applying fractional integration methods to long runs of annual data starting in 1831 for the UK and the US, in 1862 for Italy and in 1881 for France and Germany, and ending in all cases in 2022. The empirical results provide evidence of a high degree of persistence in all debt/GDP series, which appear to be I(1). However, cross-country differences emerge when analysing the properties of the individual components of debt. Specifically, in countries with a relatively large debt/GDP ratio, such as France and Italy, the primary balance is more persistent (0.5

Suggested Citation

  • Guglielmo Maria Caporale & Miguel A. Martin-Valmayor & Luis A. Gil-Alana & Nieves Carmona-González, 2024. "Persistence of the Sovereign Debt Components and Debt Sustainability: Some Evidence for the US and Europe," CESifo Working Paper Series 11409, CESifo.
    • Handle: RePEc:ces:ceswps:_11409
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    References listed on IDEAS

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    More about this item

    Keywords

    fractional integration; mean reversion; persistence; debt sustainability;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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